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:
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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