National homebuilders Inc plans to purchase new rain gutter forming equipment. Two manufacturers offered the following estimates, First Cost, $ Annual Operating Cost, $/year Salvage Value, $ Life, years Vendor A 15,000 3500 1000 6 Vendor B 18,000 3100 2000 9
National homebuilders Inc plans to purchase new rain gutter forming equipment. Two manufacturers offered the following estimates, First Cost, $ Annual Operating Cost, $/year Salvage Value, $ Life, years Vendor A 15,000 3500 1000 6 Vendor B 18,000 3100 2000 9
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:National homebuilders Inc plans to purchase new rain gutter forming equipment. Two
manufacturers offered the following estimates,
First Cost, $
Annual Operating
Cost, $/year
Salvage Value, $
Life, years
Vendor A
15,000
3500
1000
6
Vendor B
18,000
3100
2000
9
a. Determine which vendor should be selected on the basis of a PW comparison, if the
MARR is 15% per year.
b. National Homebuilders has a standard practice of evaluating all options over a 5-year
period. If a study period of 5 years is used and the salvage values are not expected to
change, which vendor should be selected?
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