Alpha Company is planning to invest in a machine, the use of which will resultin the following:• Annual revenues of $10,000 in the first year and increases of $5,000 each year,up to year 9. From year 10, the revenues will remain constant ($52,000) for anindefinite period.• The machine is to be overhauled every 10 years. The expense for each overhaulis $40,000.If Alpha expects a present worth of at least $100,000 at a MARR of 10% for thisproject, what is the maximum investment that Alpha should be prepared to make?(a) $250,130 (b) $674,697(c) $350,100 (d) $509,600
Alpha Company is planning to invest in a machine, the use of which will resultin the following:• Annual revenues of $10,000 in the first year and increases of $5,000 each year,up to year 9. From year 10, the revenues will remain constant ($52,000) for anindefinite period.• The machine is to be overhauled every 10 years. The expense for each overhaulis $40,000.If Alpha expects a present worth of at least $100,000 at a MARR of 10% for thisproject, what is the maximum investment that Alpha should be prepared to make?(a) $250,130 (b) $674,697(c) $350,100 (d) $509,600
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 40P
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Question
Alpha Company is planning to invest in a machine, the use of which will result
in the following:
• Annual revenues of $10,000 in the first year and increases of $5,000 each year,
up to year 9. From year 10, the revenues will remain constant ($52,000) for an
indefinite period.
• The machine is to be overhauled every 10 years. The expense for each overhaul
is $40,000.
If Alpha expects a present worth of at least $100,000 at a MARR of 10% for this
project, what is the maximum investment that Alpha should be prepared to make?
(a) $250,130 (b) $674,697
(c) $350,100 (d) $509,600
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