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

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 18P

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