Big Blue Granite (BBC) needs to purchase a new saw for creating their top quality countertops. Saw A costs $300, 000 with S6, 000 of annual maintenance costs for the first year that will increase by 7.5% each year for the 9 - year life of the saw. Saw B costs $150, 000 with SII, 000 of annual maintenance costs for the first year that will increase by 11.0% each year for the 4 - year life of the saw. Which saw should BBG choose? What is the annualized cost of this choice? Assume a discount rate of 14.0 % , and ignore all taxes
Big Blue Granite (BBC) needs to purchase a new saw for creating their top quality countertops. Saw A costs $300, 000 with S6, 000 of annual maintenance costs for the first year that will increase by 7.5% each year for the 9 - year life of the saw. Saw B costs $150, 000 with SII, 000 of annual maintenance costs for the first year that will increase by 11.0% each year for the 4 - year life of the saw. Which saw should BBG choose? What is the annualized cost of this choice? Assume a discount rate of 14.0 % , and ignore all taxes
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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Question
Big Blue Granite (BBC) needs to purchase a new saw for creating their
top quality countertops. Saw A costs $300, 000 with S6, 000 of annual
maintenance costs for the first year that will increase by 7.5% each year
for the 9 - year life of the saw. Saw B costs $150, 000 with SII, 000 of
annual maintenance costs for the first year that will increase by 11.0%
each year for the 4 - year life of the saw. Which saw should BBG choose?
What is the annualized cost of this choice? Assume a discount rate of
14.0 % , and ignore all taxes
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