5.41 An electric utility is taking bids on the purchase, installation, and operation of mi- crowave towers. Following are some details associated with the two bids that were received: Cost per Tower Bid B Bid A Equipment cost $112,000 $98,000 Installation cost $25,000 $30,000 Annual maintenance and inspection fee $2,000 $2,500 Annual extra income taxes $800 Life 40 years 35 years Salvage value $0 Which is the most economical bid if the interest rate is considered to be 11%? Ei- ther tower will have no salvage value after 20 years of use. Use the NPW method to compare these two mutually exclusive plans.
5.41 An electric utility is taking bids on the purchase, installation, and operation of mi- crowave towers. Following are some details associated with the two bids that were received: Cost per Tower Bid B Bid A Equipment cost $112,000 $98,000 Installation cost $25,000 $30,000 Annual maintenance and inspection fee $2,000 $2,500 Annual extra income taxes $800 Life 40 years 35 years Salvage value $0 Which is the most economical bid if the interest rate is considered to be 11%? Ei- ther tower will have no salvage value after 20 years of use. Use the NPW method to compare these two mutually exclusive plans.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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q5.41
Transcribed Image Text:5.41 An electric utility is taking bids on the purchase, installation, and operation of mi-
crowave towers. Following are some details associated with the two bids that were
received:
Cost per Tower
Bid A
Bid B
Equipment cost
$112,000
$98,000
Installation cost
$25,000
$30,000
Annual maintenance
and inspection fee
$2,000
$2,500
Annual extra income taxes
$800
Life
40 years
35 years
Salvage value
$O
$0
Which is the most economical bid if the interest rate is considered to be 11%? Ei-
ther tower will have no salvage value after 20 years of use.
Use the NPW method to compare these two mutually exclusive plans.
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