A granite company is planning to buy a fully automated granite cutting machine. If it is purchased under down payment, the cost of the machine is $ 16,00,000. If it is purchased under installment basis, the company has to pay 25% of the cost at the time of purchase and the remaining amount in 10 annual equal installments of $ 2,00,000 each. Suggest the best alternative for the company using the present worth basis at i = 18%, compounded annually.
A granite company is planning to buy a fully automated granite cutting machine. If it is purchased under down payment, the cost of the machine is $ 16,00,000. If it is purchased under installment basis, the company has to pay 25% of the cost at the time of purchase and the remaining amount in 10 annual equal installments of $ 2,00,000 each. Suggest the best alternative for the company using the present worth basis at i = 18%, compounded annually.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
A granite company is planning to buy a fully automated
granite cutting machine. If it is purchased under down payment, the cost of the
machine is $ 16,00,000. If it is purchased under installment basis, the
company has to pay 25% of the cost at the time of purchase and the remaining
amount in 10 annual equal installments of $ 2,00,000 each. Suggest the best
alternative for the company using the present worth basis at i = 18%,
compounded annually.
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