Please help with this equipment service problem (2). After 5 years' operation, two pieces of equipment are being considered for the same service to beadded to the existing plant, the installed costs and yearly operating costs associated with each piece ofthe equipment are as follows:CostsInvestmentA$4500Operating costEquipment life$2500/year4yB$7000$1600/year5ya. If the internal rate is 8% p.a, which equipment do you recommend using equivalent annualoperating cost method?b. For both equipment, there are two material options, leading to different yearly saving. Pleasedetermine the option for the chosen piece of equipment with the same internal interest rate of10% and 5-year operation using both capital cost and operating cost methods?OptionsA-1Investment costs$5000Yearly savings$2000A-2$6000$3000B-1$8000$3200B-2$12,000$4000

Part (a): Equivalent Annual Cost (EAC) for Equipment A and BWe are given:Equipment A:Investment =…

Answered: (2). After 5 years' operation, two…

Marketing

20th Edition

ISBN:9780357033791

Author:Pride, William M

Publisher:Pride, William M

Chapter19: Pricing Concepts

Section: Chapter Questions

Problem 6DRQ

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