A company must purchase a cyclone to control dust from a foundry operation. The lowest bid on a cyclone that would meet all control requirements is for a carbon-steel cyclone with an installed cost of $36,000, The cyclone has a service life of 5 years. A bid was also received for a stainless-steel cyclone that is guaranteed for 10 years and would lower maintenance costs by $1100 per year. The installed cost of the stainless-steel cyclone is $60,000. Both cyclones are estimated to have zero salvRge value. If the company currently receives a 12% return before taxes on all investments, which cyclone should be purchased?
A company must purchase a cyclone to control dust from a foundry operation. The lowest bid on a cyclone that would meet all control requirements is for a carbon-steel cyclone with an installed cost of $36,000, The cyclone has a service life of 5 years. A bid was also received for a stainless-steel cyclone that is guaranteed for 10 years and would lower maintenance costs by $1100 per year. The installed cost of the stainless-steel cyclone is $60,000. Both cyclones are estimated to have zero salvRge value. If the company currently receives a 12% return before taxes on all investments, which cyclone should be purchased?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A company must purchase a cyclone to control dust from a foundry
operation. The lowest bid on a cyclone that would meet all control
requirements is for a carbon-steel cyclone with an installed cost of
$36,000, The cyclone has a service life of 5 years. A bid was also
received for a stainless-steel cyclone that is guaranteed for 10 years and
would lower maintenance costs by $1100 per year. The installed cost of
the stainless-steel cyclone is $60,000. Both cyclones are estimated to
have zero salvRge value. If the company currently receives a 12% return
before taxes on all investments, which cyclone should be purchased?
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