alternIcench company, is considering the following two equipment ives for the pl

Question

alternIcench company, is considering the following two equipment ives for the plant in Tennessee. The cost information for the two achines are consideration are in table below. Machine X Initial cost Machine Y $ 80,000 Benefits/year $ 12for the first 6 9,000 $ 66000 ,000 per year for 20 years. next 10 Life years 10 years and 8,000 for the Salvage value $GOOOO MARR 20 years $ 20 OOOO 10% Find the NPW of machine v 2. Given the cash flows in table below. Determine the value of P. is 3% per year Year 0 1 2 3 145 Cash Flow P100 200 3OO 400 400 (

Explanation / Answer

(1)

NPW, Machine Y ($) = - 66,000 + 9,000 x PVIFA(10%, 20) + 20,000 x PVIF(10%, 20)

= - 60,000 + 9,000 x 8.5136 + 20,000 x 0.1486 = - 60,000 + 76,622 + 2,972

= 19,594

(2)

P = 100 x PVIF(3%, 1) + 200 x PVIF(3%, 2) + 300 x PVIF(3%, 3) + 400 x PVIF(3%, 4) + 400 x PVIF(3%, 5)

= 100 x 0.9709 + 200 x 0.9426 + 300 x 0.9151 + 400 x 0.8885 + 400 x 0.8626

= 97.09 + 188.52 + 274.53 + 355.4 + 345.04

= 1,260.58

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