A construction company is planning to invest for the purchase of a heavy construction equipment which will be used at a construction site. There are three feasible alternatives and the detailed cash flow of all the alternatives are presented in the table. Each alternative has the useful life of 8 years. If the company's MARR is 12% per year, use an appropriate rate of return method to determine which alternative, if any, the company should choose.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
A construction company is planning to invest for the purchase of a heavy construction
equipment which will be used at a construction site. There are three feasible alternatives
and the detailed cash flow of all the alternatives are presented in the table. Each
alternative has the useful life of 8 years. If the company's MARR is 12% per year, use an
appropriate rate of return method to determine which alternative, if any, the company
should choose.
Alternatives
1
2
3
Initial investment
($)
2 700 000
3 200 000
2 400 000
Annual saving Salvage value Useful life
(Years)
($)
525 000
640 000
415 000
($)
710 000
860 000
590 000
8
8
8
Transcribed Image Text:A construction company is planning to invest for the purchase of a heavy construction equipment which will be used at a construction site. There are three feasible alternatives and the detailed cash flow of all the alternatives are presented in the table. Each alternative has the useful life of 8 years. If the company's MARR is 12% per year, use an appropriate rate of return method to determine which alternative, if any, the company should choose. Alternatives 1 2 3 Initial investment ($) 2 700 000 3 200 000 2 400 000 Annual saving Salvage value Useful life (Years) ($) 525 000 640 000 415 000 ($) 710 000 860 000 590 000 8 8 8
Expert Solution
steps

Step by step

Solved in 4 steps with 1 images

Blurred answer
Knowledge Booster
Bond
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education