Question 7. The City of Lubbock has decided to buy a new snow removal machine to avert the occasional snowpocalypse. Thus, the city of Lubbock decided to buy a new snow removal machine. The officials can choose between two different machines: 1. The Blizzard has a $70,000.00 first cost, life of 20 years and $8,000.00 salvage value. At the end of 9 years, it will need a major overhaul costing $9,000.00. Annual maintenance and operating costs are $9,000.00. 2. The Snow Mower will cost $50,000.00, has an expected life of 10 years and has no salvage value. The annual maintenance and operating costs are expected to be $12,000.00 Using a 12.00% interest rate, which machine should be chosen?
Question 7. The City of Lubbock has decided to buy a new snow removal machine to avert the occasional snowpocalypse. Thus, the city of Lubbock decided to buy a new snow removal machine. The officials can choose between two different machines: 1. The Blizzard has a $70,000.00 first cost, life of 20 years and $8,000.00 salvage value. At the end of 9 years, it will need a major overhaul costing $9,000.00. Annual maintenance and operating costs are $9,000.00. 2. The Snow Mower will cost $50,000.00, has an expected life of 10 years and has no salvage value. The annual maintenance and operating costs are expected to be $12,000.00 Using a 12.00% interest rate, which machine should be chosen?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Question 7.
The City of Lubbock has decided to buy a new snow removal machine to avert the
occasional snowpocalypse. Thus, the city of Lubbock decided to buy a new snow
removal machine. The officials can choose between two different machines:
1. The Blizzard has a $70,000.00 first cost, life of 20 years and $8,000.00 salvage
value. At the end of 9 years, it will need a major overhaul costing $9,000.00.
Annual maintenance and operating costs are $9,000.00.
2. The Snow Mower will cost $50,000.00, has an expected life of 10 years and has
no salvage value. The annual maintenance and operating costs are expected to
be $12,000.00
Using a 12.00% interest rate, which machine should be chosen?
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