Two proposals were introduced to a telecom company manger to increase the internet speed. Proposal A is planning to purchase equipment and accessories for $8M. The equipment is expected to have a 15-year life with a $270,000 salvage value. The annual operating costs are estimated to total $200,000. An annual cleaning cost is expected to be $100,000. Proposal B has an initial cost of $14 M. The maintenance will be required every year at a cost of $70,000. In addition, repairs cost will have to be made every 8 years for $50,000. Compare the alternatives on the basis of annual worth, using an interest rate of 8 %per year
Two proposals were introduced to a telecom company manger to increase the internet speed. Proposal A is planning to purchase equipment and accessories for $8M. The equipment is expected to have a 15-year life with a $270,000 salvage value. The annual operating costs are estimated to total $200,000. An annual cleaning cost is expected to be $100,000. Proposal B has an initial cost of $14 M. The maintenance will be required every year at a cost of $70,000. In addition, repairs cost will have to be made every 8 years for $50,000. Compare the alternatives on the basis of annual worth, using an interest rate of 8 %per year
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Two proposals were introduced to a telecom company manger to increase the internet speed. Proposal A is planning to purchase equipment and accessories for $8M. The equipment is expected to have a 15-year life with a $270,000 salvage value. The annual operating costs are estimated to total $200,000. An annual cleaning cost is expected to be $100,000. Proposal B has an initial cost of $14 M. The maintenance will be required every year at a cost of $70,000. In addition, repairs cost will have to be made every 8 years for $50,000. Compare the alternatives on the basis of annual worth, using an interest rate of 8 %per year
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