A machinery with an initial cost of $330,000 and a service life of 7 years is being considered for purchase. Its estimated annual costs include labor costs of $55,000 per year and other operation and maintenance (O&M) costs of $30,000 per year. All the estimated costs are in today's dollars. The corresponding annual inflation rates are 5.66% for labor costs and 3.7% for O&M costs. The 3.7% is also the general inflation rate. Based on a market rate-of-return of 12%, and assuming zero salvage value at the end of its service life, answer the following two questions 1. The PW cost of this machinery is O A. $717,919 O B. $772,541 C. $804,502 D. $793,222 2. The EUAC of the machinery in real dollars is O A. $142,094 O B. $152,356 O C. $173,809 O D. $148,384
A machinery with an initial cost of $330,000 and a service life of 7 years is being considered for purchase. Its estimated annual costs include labor costs of $55,000 per year and other operation and maintenance (O&M) costs of $30,000 per year. All the estimated costs are in today's dollars. The corresponding annual inflation rates are 5.66% for labor costs and 3.7% for O&M costs. The 3.7% is also the general inflation rate. Based on a market rate-of-return of 12%, and assuming zero salvage value at the end of its service life, answer the following two questions 1. The PW cost of this machinery is O A. $717,919 O B. $772,541 C. $804,502 D. $793,222 2. The EUAC of the machinery in real dollars is O A. $142,094 O B. $152,356 O C. $173,809 O D. $148,384
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![A machinery with an initial cost of $330,000 and a service life of 7 years is being considered for purchase. Its estimated annual costs
include labor costs of $55,000 per year and other operation and maintenance (O&M) costs of $30,000 per year. All the estimated costs
are in today's dollars. The corresponding annual inflation rates are 5.66% for labor costs and 3.7% for O&M costs. The 3.7% is also
the general inflation rate.
Based on a market rate-of-return of 12%, and assuming zero salvage value at the end of its service life, answer the following two
questions
1. The PW cost of this machinery is
A. $717,919
B. $772,541
C. $804,502
D. $793,222
2. The EUAC of the machinery in real dollars is
O A. $142,094
B. $152,356
C. $173,809
O D. $148,384](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3c32bbf2-0be4-465f-ad3f-a9f28ea2b35c%2F42efaf91-8483-426f-94c9-21f4bf408609%2For61ygg_processed.png&w=3840&q=75)
Transcribed Image Text:A machinery with an initial cost of $330,000 and a service life of 7 years is being considered for purchase. Its estimated annual costs
include labor costs of $55,000 per year and other operation and maintenance (O&M) costs of $30,000 per year. All the estimated costs
are in today's dollars. The corresponding annual inflation rates are 5.66% for labor costs and 3.7% for O&M costs. The 3.7% is also
the general inflation rate.
Based on a market rate-of-return of 12%, and assuming zero salvage value at the end of its service life, answer the following two
questions
1. The PW cost of this machinery is
A. $717,919
B. $772,541
C. $804,502
D. $793,222
2. The EUAC of the machinery in real dollars is
O A. $142,094
B. $152,356
C. $173,809
O D. $148,384
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