Two equipment are being considered by a contracting firm for purchase. Data on these two equipment are shown in the table below. EQUIPMENT 1 $200,000 $60,000 $15,000 EQUIPMENT 2 $170,000 $55,000 $10,000 Initial Cost Annual Benefits (Savings) Salvage Value Equipment Life 8 8. The interest rate is a variable in this scenario. Complete the Present Worth (PW) analysis of each of these equipment for 5%, 10% and 15% interest rates. (Six (6) answers are required here). a. b. Plot (or sketch/draw as accurately as possible) a graph demonstrating the PW versus the interest rate. c. Which option should be selected if the interest rate is less than 7%?
Two equipment are being considered by a contracting firm for purchase. Data on these two equipment are shown in the table below. EQUIPMENT 1 $200,000 $60,000 $15,000 EQUIPMENT 2 $170,000 $55,000 $10,000 Initial Cost Annual Benefits (Savings) Salvage Value Equipment Life 8 8. The interest rate is a variable in this scenario. Complete the Present Worth (PW) analysis of each of these equipment for 5%, 10% and 15% interest rates. (Six (6) answers are required here). a. b. Plot (or sketch/draw as accurately as possible) a graph demonstrating the PW versus the interest rate. c. Which option should be selected if the interest rate is less than 7%?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Two equipment are being considered by a contracting firm for purchase. Data on these
two equipment are shown in the table below.
Initial Cost
Annual Benefits (Savings)
Salvage Value
Equipment Life
EQUIPMENT 1
$200,000
$60,000
$15,000
EQUIPMENT 2
$170,000
$55,000
$10,000
8
The interest rate is a variable in this scenario.
a. Complete the Present Worth (PW) analysis of each of these equipment for 5%,
10% and 15% interest rates. (Six (6) answers are required here).
b. Plot (or sketch/draw as accurately as possible) a graph demonstrating the PW
versus the interest rate.
c. Which option should be selected if the interest rate is less than 7%?
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