1. A company intends to replace equipment that is no longer able to meet its needs. The two best alternatives are to purchase a manual tool (A1) or an automatic tool (A2). The estimated economic consequences of the two alternatives are: A1 A2 Initial investment ($) 28.000 65.000 Annual withdrawal ($) 14.000 9.000 Additional withdrawal every 5 years ($) 14.000 9.000 Lifespan (years) 10 20 Residual value ($) 8.000 13.000 Based on the present worth analysis, with an interest rate of 15% per year, an analysis period of 20 years, and the assumption of recurrence, determine the best alternative that must be chosen using future worth analysis.

1. A company intends to replace equipment that is no longer able to meet its needs. The two best alternatives are to purchase a manual tool (A1) or an automatic tool (A2). The estimated economic consequences of the two alternatives are: A1 A2 Initial investment ($) 28.000 65.000 Annual withdrawal ($) 14.000 9.000 Additional withdrawal every 5 years ($) 14.000 9.000 Lifespan (years) 10 20 Residual value ($) 8.000 13.000 Based on the present worth analysis, with an interest rate of 15% per year, an analysis period of 20 years, and the assumption of recurrence, determine the best alternative that must be chosen using future worth analysis.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter17: Financial Markets

Section: Chapter Questions

Problem 5SCQ: Investors sometimes fear that a high-risk investment is especially likely to have low returns. Is...

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