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 $65,000 $9,000 $13,000 Initial Investment $14,000 Annual Cost $14,000 $8,000 Market Value at End of Useful Life Useful Life 5 years 20 years a) Which machine would be selected on the basis gtteneatability assumption? b) Using co-terminated assumption with a 5 vear 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 A Alternative B $65,000 $9,000 $13,000 Initial Investment $14,000 Annual Cost $14,000 $8,000 Market Value at End of Useful Life Useful Life 5 years 20 years a) Which machine would be selected on the basis gtteneatability assumption? b) Using co-terminated assumption with a 5 vear 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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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