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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Transcribed Image Text:ger 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 dolla
Equipment B
(actual $)
$11,700
ses a market intere
con to view the inter
quipment A is
quipment B is
our answer.
More Info
N
1
2
3
4
5
6
7
8
9
10
Initial Investment
Single Payment
Compound
Amount
Factor
To Find F
Given P
F/P
1.1000
1.2100
1.3310
1.4641
1.6105
1.7716
1.9487
2.1436
2.3579
2.5937
Present
Worth Factor
To Find P
Given F
P/F
0.9091
0.8264
0.7513
0.6830
0.6209
0.5645
0.5132
0.4665
0.4241
0.3855
Discrete Compounding; /- 10%
Uniform Series
Compound
Amount
Factor
To Find F
Given A
FIA
1.0000
2.1000
3.3100
4.6410
6.1051
7.7156
9.4872
11.4359
13.5795
15.9374
Equipment A
(year-zero $)
$9,300
Present
Worth Factor
To Find P
Given A
PIA
0.9091
1.7355
2.4869
3.1699
3.7908
4.3553
4.8684
5.3349
5.7590
6.1446
Print
Done
Sinking
Fund
Factor
To Find A
Given F
A/F
1.0000
0.4762
0.3021
0.2155
0.1638
0.1296
0.1054
0.0874
0.0736
0.0627
Capital
Recovery
Factor
To Find A
Given P
A/P
1.1000
0.5762
0.4021
0.3155
0.2638
0.2296
0.2054
0.1874
0.1736
0.1627
Uniform Gradient
Gradient
Present
Worth Factor
To Find P
Given G
P/G
0.0000
0.8264
2.3291
4.3781
6.8618
9.6842
12.7631
16.0287
- X
19.4215
22.8913
Gradient
Uniform
Series
Factor
To Find A
Given G
A/G
0.0000
0.4762
0.9366
1.3812
1.8101
2.2236
2.6216
3.0045
3.3724
3.7255

Transcribed Image Text: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 $)
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
2. The PW of Equipment B is
OA. $15,555
OB. $21,835
Equipment A
(year-zero $)
OC. $15,700
OD. $26,346
$9,300
$3,000
$0
12
$11,700
$4,000
$0
12
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