A piece of production equipment is to be replaced immediately because it no longer meets quality requirements for the end product. The two best alternatives are a used piece of equipment (E1) and a new automated model (E2). The economic estimates for Alt E1 Alt E2 Capital Investment PhP 14,000 PhP 65,000 Aппual Expenses 14,000 9,000 each are shown in the accompanying table. Useful Life (years) 20 Market Value (at the end of useful life) 8,000 13,000 The MARR is 15% per year. Which alternative is preferred, based on the (a) coterminated assumption with a five-year study period and an imputed market value for Alternative b? Use FW.
A piece of production equipment is to be replaced immediately because it no longer meets quality requirements for the end product. The two best alternatives are a used piece of equipment (E1) and a new automated model (E2). The economic estimates for Alt E1 Alt E2 Capital Investment PhP 14,000 PhP 65,000 Aппual Expenses 14,000 9,000 each are shown in the accompanying table. Useful Life (years) 20 Market Value (at the end of useful life) 8,000 13,000 The MARR is 15% per year. Which alternative is preferred, based on the (a) coterminated assumption with a five-year study period and an imputed market value for Alternative b? Use FW.
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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Transcribed Image Text:A piece of production equipment is to be replaced immediately because it no longer meets quality requirements for the end
product. The two best alternatives are a used piece of equipment (E1) and a new automated model (E2). The economic estimates for
Alt E1
Alt E2
Capital Investment
PhP 14,000 PhP 65,000
Aппual Expenses
14,000
9,000
each are shown in the accompanying table.
Useful Life (years)
5
20
Market Value (at the end of useful life)
8,000
13,000
The MARR is 15% per year. Which alternative is preferred, based on the
(a) coterminated assumption with a five-year study period and an imputed market value for Alternative b? Use FW.
ANSWER:
FW (E1) = PhP Blank 1
FW (E2) = PhP Blank 2
The best alternative is EBlank 3
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