A company is considering a new piece of equipment for a project lasting 10 years
ID: 2802756 • Letter: A
Question
A company is considering a new piece of equipment for a project lasting 10 years with details as shown below. The costs and benefits are expected to keep increasing with the inflation rate even when a new machine is put into operation. Taking these into account, what is the annual worth that the company can expect from the machine? Initial cost $145,000 MARR 18% p y c y Inflation rate 4% p y c y Life 7 years Project life 10 years Machine value today with life of 3 years $64,500 Machine value today with life of 7 years $33,500 First year costs $62,200 First year benefits $96,800
A $3,260 B $2,969 C $1,779 D $985
Explanation / Answer
ANSWER:
CALUCULATION OF INFLOWS
CALUCULATION OF COSTS 145000+64500+33500 =243000
BENEFIT =$3260
benefits costs net benefit Present vlue factor@13.4% Amount 96,800 62,200 34,600 0.881290209 30,492.64 1,06,480 68,420 38,060 0.776672432 12,205.04 1,17,128 75,262 41,866 0.68447381 28,656.18 1,28,841 82,788 46,053 0.603220067 27,779.85 1,41,725 91,067 50,658 0.531611939 26,930.32 1,55,897 1,00,174 55,724 0.468504397 26,106.77 1,71,487 1,10,191 61,296 0.412888338 25,308.41 1,88,636 1,21,210 67,426 0.363874449 24,534.46 2,07,499 1,33,331 74,168 0.320678989 23,784.17 2,28,249 1,46,664 81,585 0.282611254 23,056.84 2,48,854.69Related Questions
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