how to solve using a financial calculator Ross Inc is considering two mutually e

Question

how to solve using a financial calculator
Ross Inc is considering two mutually exclusive equipment alternatives to increase its
production volume. The respective financial estimates for each alternative are as follows.
Data Equipment A Equipment B
Initial Cost $50K $106.31K
EUAB $16K $24K
Salvage Value $9K $0
If the useful life of equipment A is 4 years, with a MARR of 10%, the useful life in years of
equipment B that makes both the equipment equally desirable is most nearly equal to:
a. 4
b. 5
c. 6
d. 7

Explanation / Answer

for equipment A

NPV = -50000 +16000(1/1.1 + 1/1.12 + 1/1.13 + 1/1.14 ) + 9000/1.14

= 6864.96

now for equipment B to be of same value

after 1 year value of B = -106310 + 24000/1.1 = -84491.82

after 2nd year = -84491.82 + 24000/1.12 = -64657

...so on

after 6 years value = -1783.74

after 7 years = 10532 > 6864

so the no of years = 6+ (6864/(10532+1783.74)) = 6.557 years

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