A firm is considering the purchase of a new machine to increase the output of an existing production process. If each of these machines provides the same service over their useful lives and the MARR is 15%, Alternative B Alternative A Initial Investment $14,000 Annual Cost $14,000 Market Value at $8,000 End of Useful Life Useful Life 5 years $65,000 $9,000 $13,000 20 years a) Which machine would be selected on the basis of repeatability assumption? b) Using co-terminated assumption with a 5 year study period (compute imputed market value for alternative B), which alternative is preferred? c) If perpetual service life is assumed, which of these alternatives do you recommend?
A firm is considering the purchase of a new machine to increase the output of an existing production process. If each of these machines provides the same service over their useful lives and the MARR is 15%, Alternative B Alternative A Initial Investment $14,000 Annual Cost $14,000 Market Value at $8,000 End of Useful Life Useful Life 5 years $65,000 $9,000 $13,000 20 years a) Which machine would be selected on the basis of repeatability assumption? b) Using co-terminated assumption with a 5 year study period (compute imputed market value for alternative B), which alternative is preferred? c) If perpetual service life is assumed, which of these alternatives do you recommend?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...
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Engg economy. Pls answer a, b, and c. Thank you.
![A firm is considering the purchase of a new machine to increase the output of an existing production process. If each of these
machines provides the same service over their useful lives and the MARR is 15%,
Alternative A
Alternative B
$14,000
$65,000
$9,000
$13,000
Initial Investment
$14,000
$8,000
Annual Cost
Market Value at
End of Useful Life
Useful Life
5 years
20 years
a) Which machine would be selected on the basis of.repeatability assumption?
b) Using co-terminated assumption with a 5 year study period (compute imputed market value for alternative B), which
alternative is preferred?
c) If perpetual service life is assumed, which of these alternatives do you recommend?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc0443de0-20de-440e-9219-628ba456abbd%2Fdd175e2e-d1bd-41f8-9894-1db23e7b4d35%2F3ckomo6_processed.png&w=3840&q=75)
Transcribed Image Text:A firm is considering the purchase of a new machine to increase the output of an existing production process. If each of these
machines provides the same service over their useful lives and the MARR is 15%,
Alternative A
Alternative B
$14,000
$65,000
$9,000
$13,000
Initial Investment
$14,000
$8,000
Annual Cost
Market Value at
End of Useful Life
Useful Life
5 years
20 years
a) Which machine would be selected on the basis of.repeatability assumption?
b) Using co-terminated assumption with a 5 year study period (compute imputed market value for alternative B), which
alternative is preferred?
c) If perpetual service life is assumed, which of these alternatives do you recommend?
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