a. If the study period = 20 years, which alternative is preferred? %3D Boiler A Boiler B Investment cost $50,000 $120,000 Useful life 20 yrs. 40 yrs. Salvage value @ end of useful life 10,000 20,000 Annual costs 9,000 6,000 Useful life of A = 20 years = study period Useful life of B = 40 years > study period Assume MV B@ EOY 20 = $50,000 The MARR is 10% per year.
a. If the study period = 20 years, which alternative is preferred? %3D Boiler A Boiler B Investment cost $50,000 $120,000 Useful life 20 yrs. 40 yrs. Salvage value @ end of useful life 10,000 20,000 Annual costs 9,000 6,000 Useful life of A = 20 years = study period Useful life of B = 40 years > study period Assume MV B@ EOY 20 = $50,000 The MARR is 10% per year.
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
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Transcribed Image Text:a. If the study period = 20 years, which alternative is preferred?
Boiler A
Boiler B
Investment cost
$50,000
$120,000
Useful life
20 yrs.
40 yrs.
Salvage value @
end of useful life
10,000
20,000
Annual costs
9,000
6,000
Useful life of A = 20 years = study period
%3D
Useful life of B = 40 years > study period
Assume MV B @ EOY 20 = $50,000
The MARR is 10% per year.
Which alternative is preferred?
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