FE: You must choose between four pieces of comparable equipment based on the cash flows below. All four have a life of 8 years. Parameter A B C D First cost $25,000 $35,000 $20,000 $40,000 Annual costs $8,000 $6,000 $9,000 $5,000 Salvage value $2,500 $3,500 $2,000 $4,000 The discount rate is 12%. Ignore taxes. What are the two most preferable pieces of equipment? What is the approximate difference between their present worth values? OA and C, $234 OB and D, $234 OA and C, $170 OB and D, $170

FE: You must choose between four pieces of comparable equipment based on the cash flows below. All four have a life of 8 years. Parameter A B C D First cost $25,000 $35,000 $20,000 $40,000 Annual costs $8,000 $6,000 $9,000 $5,000 Salvage value $2,500 $3,500 $2,000 $4,000 The discount rate is 12%. Ignore taxes. What are the two most preferable pieces of equipment? What is the approximate difference between their present worth values? OA and C, $234 OB and D, $234 OA and C, $170 OB and D, $170

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

FE: You must choose between four pieces of comparable equipment based on the cash flows
below. All four have a life of 8 years.
Parameter
A
B
C
D
First cost
$25,000
$35,000
$20,000
$40,000
Annual costs
$8,000
$6,000
$9,000
$5,000
Salvage value
$2,500
$3,500
$2,000
$4,000
The discount rate is 12%. Ignore taxes. What are the two most preferable pieces of
equipment? What is the approximate difference between their present worth values?
A and C, $234
OB and D, $234
OA and C, $170
OB and D, $170

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