Saudi Farming wants to use Tractors. Two models are available: Model A: Initial cost 80,000, Annual maintenance: 3000; Useful life : 3 years; Salvage value :10,000 Model B: Initial cost 120,000, Annual maintenance: 2000; Useful life : 6 years; Salvage value :15,000 Assuming that both models will be available with identical cost for at least 20 years. MARR for the company is 10%. Using annual equivalence method, what would be the annual cost saving if Model B is used compared to Model A? 5,538.9 4,812.4 3,539.6 4,539.3
Saudi Farming wants to use Tractors. Two models are available: Model A: Initial cost 80,000, Annual maintenance: 3000; Useful life : 3 years; Salvage value :10,000 Model B: Initial cost 120,000, Annual maintenance: 2000; Useful life : 6 years; Salvage value :15,000 Assuming that both models will be available with identical cost for at least 20 years. MARR for the company is 10%. Using annual equivalence method, what would be the annual cost saving if Model B is used compared to Model A? 5,538.9 4,812.4 3,539.6 4,539.3
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
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Transcribed Image Text:Saudi Farming wants to use Tractors. Two models are available:
Model A: Initial cost 80,000, Annual maintenance: 3000; Useful life : 3 years; Salvage value :10,000
Model B: Initial cost 120,000, Annual maintenance: 2000; Useful life : 6 years; Salvage value :15,000
Assuming that both models will be available with identical cost for at least 20 years. MARR for the company is 10%. Using annual equivalence method, what would be the annual
cost saving if Model B is used compared to Model A?
5,538.9
4,812.4
3,539.6
4,539.3
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