Dark Skies observatory is considering several options to purchase a new deep space telescope. Revenue would be generated by selling "time and use" slots to various researchers around the world. Four possible telescopes have been identified in addition to the possibility of not buying a telescope if none are financially attractive. The table below details the characteristics of each telescope. MARR is 25%. Which alternative should be recommended? Alternative T1 T2 T3 T4 Useful life (years) 10 10 10 10 First cost $ 900,000 $ 1,150,000 $ 700,000 $ 720,000 Salvage Value $ 135,000 $ 180,000 $ 65,000 $ 200,000 Annual Revenue $ 400,000 $ 600,000 $ 260,000 $ 320,000 Annual Operating Cost $ 130,000 $ 270,000 $ 70,000 $ 120,000
Dark Skies observatory is considering several options to purchase a new deep space telescope. Revenue would be generated by selling "time and use" slots to various researchers around the world. Four possible telescopes have been identified in addition to the possibility of not buying a telescope if none are financially attractive. The table below details the characteristics of each telescope. MARR is 25%. Which alternative should be recommended? Alternative T1 T2 T3 T4 Useful life (years) 10 10 10 10 First cost $ 900,000 $ 1,150,000 $ 700,000 $ 720,000 Salvage Value $ 135,000 $ 180,000 $ 65,000 $ 200,000 Annual Revenue $ 400,000 $ 600,000 $ 260,000 $ 320,000 Annual Operating Cost $ 130,000 $ 270,000 $ 70,000 $ 120,000
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Dark Skies observatory is considering several options to purchase a new deep space telescope. Revenue
would be generated by selling "time and use" slots to various researchers around the world. Four possible
telescopes have been identified in addition to the possibility of not buying a telescope if none are financially
attractive. The table below details the characteristics of each telescope.
MARR is 25%. Which alternative should be recommended?
Alternative
T1
T2
T3
T4
Useful life (years)
10
10
10
10
First cost
$
900,000
$ 1,150,000
$
700,000
$
720,000
Salvage Value
$
135,000
$
180,000
$
65,000
$
200,000
Annual Revenue
$
400,000
$
600,000
$
260,000
$
320,000
Annual Operating Cost
$
130,000
$
270,000
$
70,000
$
120,000
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