A factory manager is considering the purchase of one of the following two production equipment. Cash flow estimates for equipment A are in year-zero dollars while those of equipment B are in actual dollars. Equipment B (actual $) $11,700 Equipment A (year-zero $) Initial investment Net annual revenue Market value at end of useful life Useful life, years The manager uses a market interest rate of 10% per year. If inflation rate is expected to average 3.77% per year over the next several years, determine the PW of each equipment. Click the icon to view the interest and annuity table for discrete compounding when i = 10% per year. 1. The PW of Equipment A is OA. $19,235 OB. $12,300 OC. $11,141 OD $15.852 $9,300 $3,000 $0 12 $4,000 $0 12
A factory manager is considering the purchase of one of the following two production equipment. Cash flow estimates for equipment A are in year-zero dollars while those of equipment B are in actual dollars. Equipment B (actual $) $11,700 Equipment A (year-zero $) Initial investment Net annual revenue Market value at end of useful life Useful life, years The manager uses a market interest rate of 10% per year. If inflation rate is expected to average 3.77% per year over the next several years, determine the PW of each equipment. Click the icon to view the interest and annuity table for discrete compounding when i = 10% per year. 1. The PW of Equipment A is OA. $19,235 OB. $12,300 OC. $11,141 OD $15.852 $9,300 $3,000 $0 12 $4,000 $0 12
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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