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Octavia Bakery is planning to purchase one of two ovens. The expected cash flows for each oven are shown below. MARR is 8%/year.      ​                Model 127B                 ​Model 334A Initial Investment ​        $50,000 ​                    $80,000 Estimated Life ​        10                             ​5 End of Life Salvage ​    $10,000                         ​$0 Annual Income ​        $19,400                     ​$26,000 Annual Expense         ​$10,000 ​                    $6,000   2(a)    What is the discounted payback period for each investment? 2(b)    Which oven should Octavia Bakery purchase if they wish to minimize the DPBP? Answer:

Octavia Bakery is planning to purchase one of two ovens. The expected cash flows for each oven are shown below. MARR is 8%/year.      ​                Model 127B                 ​Model 334A Initial Investment ​        $50,000 ​                    $80,000 Estimated Life ​        10                             ​5 End of Life Salvage ​    $10,000                         ​$0 Annual Income ​        $19,400                     ​$26,000 Annual Expense         ​$10,000 ​                    $6,000   2(a)    What is the discounted payback period for each investment? 2(b)    Which oven should Octavia Bakery purchase if they wish to minimize the DPBP? Answer:

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Octavia Bakery is planning to purchase one of two ovens. The expected cash flows for each oven are shown below. MARR is 8%/year.
    
​                Model 127B                 ​Model 334A

Initial Investment ​        $50,000 ​                    $80,000

Estimated Life ​        10                             ​5

End of Life Salvage ​    $10,000                         ​$0

Annual Income ​        $19,400                     ​$26,000

Annual Expense         ​$10,000 ​                    $6,000

 

2(a)    What is the discounted payback period for each investment?

2(b)    Which oven should Octavia Bakery purchase if they wish to minimize the DPBP?

Answer:

 

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