Q- S Dave Construction Inc. needs additional small overhead crane to improve mat

Question

Q- S Dave Construction Inc. needs additional small overhead crane to improve material handling and Safety requirement in their design labs area. They are considering two popular Models,J5) Air Left k95 And CMF 1034 . The local bank offering for new loan 4% every 6 months and MARR is 12%. The financial data for each model are given: Model initialCost I) Air Left K95 20,000 II) CMF 1034 $$29000 Which model is more economical for Dave Construction Inc.? $2,000 $8,000 6 years 7 years $4,000 $4,000 Explain in detail your setup, Formuta, Calculation, and recommendation

Explanation / Answer

PMT = PV*r / (1 - (1+r)-n)

PMT = FV*r / ((1+r)n - 1)

Annual cost = - Annual investment + annual receipts + Annual salvage

Annual Costs of Air Left = (-20000*12% / (1-(1+12%)-6)) - 8000 + (2000*12% / ((1+12%)6 -1))) = -12618.06

Annual Costs of CMF = (-29000*12% / (1-(1+12%)-7)) - 4000 + (4000*12% / ((1+12%)7 -1))) = -9957.94

CMF has the lower annual cost,hence prefer CMF

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