The equivalent annual worth of an existing machine at American Semiconductor is estimated to be $ −70,000 per year over its remaining useful life of 3 years. It can be replaced now or later with a machine that will have an AW of $ −90,000 per year if it is kept for 2 years or less, $75,000 if it is kept between 3 and 5 years, and $ −65,000 if it is kept for 6 to 8 years. The company wants an analysis of what it should do for a 3-year study period at an interest rate of 15% per year. You should recommend that the existing machine be replaced: (a) Now (b) One year from now (c) Two years from now (d ) Do not replace it
The equivalent annual worth of an existing machine at American Semiconductor is estimated to be $ −70,000 per year over its remaining useful life of 3 years. It can be replaced now or later with a machine that will have an AW of $ −90,000 per year if it is kept for 2 years or less, $75,000 if it is kept between 3 and 5 years, and $ −65,000 if it is kept for 6 to 8 years. The company wants an analysis of what it should do for a 3-year study period at an interest rate of 15% per year. You should recommend that the existing machine be replaced: (a) Now (b) One year from now (c) Two years from now (d ) Do not replace it
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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The equivalent annual worth of an existing machine
at American Semiconductor is estimated to
be $ −70,000 per year over its remaining useful
life of 3 years. It can be replaced now or later with
a machine that will have an AW of $ −90,000 per
year if it is kept for 2 years or less, $75,000 if it is
kept between 3 and 5 years, and $ −65,000 if it is
kept for 6 to 8 years. The company wants an analysis
of what it should do for a 3-year study period at an interest rate of 15% per year. You should recommend
that the existing machine be replaced:
(a) Now
(b) One year from now
(c) Two years from now
(d ) Do not replace it
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