1. Determine which of the two following cash flows is preferable, using a MARR of 8%. You can use any method you prefer and may assume repeatability is an acceptable assumption. Option A requires an initial investment of $39000 and produces for five years an annual return of $11200. The salvage value at five years is expected to be $6000. Option B requires an initial investment of $49000 and produces an annual return for seven years of 13500. Option B requires an additional maintenance cost of $1500 in the third year. The salvage value at seven years is expected to be $10700.
1. Determine which of the two following cash flows is preferable, using a MARR of 8%. You can use any method you prefer and may assume repeatability is an acceptable assumption. Option A requires an initial investment of $39000 and produces for five years an annual return of $11200. The salvage value at five years is expected to be $6000. Option B requires an initial investment of $49000 and produces an annual return for seven years of 13500. Option B requires an additional maintenance cost of $1500 in the third year. The salvage value at seven years is expected to be $10700.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 3CMA
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![handwritten.
1. Determine which of the two following cash flows is preferable, using a MARR of 8%. You
can use any method you prefer and may assume repeatability is an acceptable assumption.
Option A requires an initial investment of $39000 and produces for five years an annual return
of $11200. The salvage value at five years is expected to be $6000.
Option B requires an initial investment of $49000 and produces an annual return for seven
years of 13500. Option B requires an additional maintenance cost of $1500 in the third year.
The salvage value at seven years is expected to be $10700.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdd1b5152-4f40-4597-ac3a-baa9bd5e8970%2Fb7db2464-e855-4197-ae9e-0f47bcabe748%2Fu54vxhv_processed.jpeg&w=3840&q=75)
Transcribed Image Text:handwritten.
1. Determine which of the two following cash flows is preferable, using a MARR of 8%. You
can use any method you prefer and may assume repeatability is an acceptable assumption.
Option A requires an initial investment of $39000 and produces for five years an annual return
of $11200. The salvage value at five years is expected to be $6000.
Option B requires an initial investment of $49000 and produces an annual return for seven
years of 13500. Option B requires an additional maintenance cost of $1500 in the third year.
The salvage value at seven years is expected to be $10700.
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