A 1-year-old defender has a current market value of $ 5,000. Its operating and maintenance expenses for next year are $ 2,000 and are expected to grow 1,500 each year. This year repairs were made for $ 1,200. Its market value is expected to decline 25% each year. The machine can continue to be used for 2 more years. There is a challenger that costs $ 10,000 and has operating and maintenance expenses of $ 2,200 per year. The machine will only be used for 3 years and the salvage value will be 6,000 after one year and will decrease 15% annually after that. The MARR demanded by investors is 12% 1. Calculate the Equivalent Annual Cost of the two options that the company has 2. Which is the best strategy?
A 1-year-old defender has a current market value of $ 5,000. Its operating and maintenance expenses for next year are $ 2,000 and are expected to grow 1,500 each year. This year repairs were made for $ 1,200. Its market value is expected to decline 25% each year. The machine can continue to be used for 2 more years. There is a challenger that costs $ 10,000 and has operating and maintenance expenses of $ 2,200 per year. The machine will only be used for 3 years and the salvage value will be 6,000 after one year and will decrease 15% annually after that.
The MARR demanded by investors is 12%
1. Calculate the Equivalent Annual Cost of the two options that the company has
2. Which is the best strategy?
(Can help me doing it in excel please)
Step by step
Solved in 3 steps with 2 images
