The firm is considering two machines: Machine A with initial investment of $10,000 and annual maintenance cost of $1,000. The life of the machine A is 4 years. Machine B with initial investment of $20,000 and annual maintenance cost of $800. The life of the machine B is 6 years. If the required rate of return is 10%, calculate the equivalent annual cost (EAC) of each machine and which machine company must choose? (A) The EAC of Machine A is $4,154.71 and Machine B is $5,392.15. The Company must choose Machine B. (B) The EAC of Machine A is $4,154.71 and Machine B is $5,392.15. The Company must choose Machine A. (C) The EAC of Machine A is $3,169.87 and Machine B is $3,484.21. The Company must choose Machine B. (D) The EAC of Machine A is $3,169.87 and Machine B is $3,484.21. The Company must choose Machine A.

The firm is considering two machines: Machine A with initial investment of $10,000 and annual maintenance cost of $1,000. The life of the machine A is 4 years. Machine B with initial investment of $20,000 and annual maintenance cost of $800. The life of the machine B is 6 years. If the required rate of return is 10%, calculate the equivalent annual cost (EAC) of each machine and which machine company must choose? (A) The EAC of Machine A is $4,154.71 and Machine B is $5,392.15. The Company must choose Machine B. (B) The EAC of Machine A is $4,154.71 and Machine B is $5,392.15. The Company must choose Machine A. (C) The EAC of Machine A is $3,169.87 and Machine B is $3,484.21. The Company must choose Machine B. (D) The EAC of Machine A is $3,169.87 and Machine B is $3,484.21. The Company must choose Machine A.

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 initial cost of one customized machine is $675,000 with an annual operating cost of $14,800, and a life of 4 years. The machine will be worthless and replaced at the end of its life. What is the equivalent annual cost of this machine if the required rate of return is 14.5 percent and we ignore taxes? USING EXCEL FORMULAS
wallace inc is considering spending $100,000 for a new grinding machine. this amount could be invested to yield a 12% return. what is the opportunity cost?
Your company is deciding whether to purchase a high-quality printer for your office or one of lesser quality. The high-quality printer costs $45 000 and should last five years. The lesser quality printer costs $25 000 and should last two years. If the cost of capital for the company is 12 per cent, then what is the equivalent annual cost for the best choice for the company?
Consider a new machine at a bottling plant that has a first cost of $150000, operating and maintenance costs of $18900 per year, and an estimated net salvage value of $16000 at the end of 30 years. Assume an interest rate of 5%. What is the annual equivalent cost of the investment if the planning horizon is 30 years?
A process for producing the mosquito repellant Deet has an initial investment of $205,000 with annual costs of $51,000. Income is expected to be $90,000 per year. What is the payback period at /= 0% per year? At i=12% per year? (Note: Round your answers to the nearest integer.) The payback period at /= 0% is determined to be The payback period at /= 12% is determined to be years. years.
Fabco, Inc., is considering purchasing flow valves that will reduce annual operating costs by $10,000 per year for the next 12 years. Fabco’s MARR is 7%/year. Using an internal rate of return approach, determine the maximum amount Fabco should be willing to pay for the valves. $
The purchasing price for a dye press is $30,000. It is expected to provide labour cost savings of $5,000 in year 1. The savings are expected to increase linearly by X$ each year for seven years. Find the dollar value of X such that the purchase price is justified by the labour savings at MARR = 5%.The solution is with $1 of which of the following?65.8067.8069.8071.80None of the above
The Fence Company is setting up a new production line to produce top rails. The relevant data for two alternatives are shown below. Solve, a. Based on MARR of 8%, determine the annual rate of production for which the alternatives are equally economical. b. If it is estimated that production will be 300 top rails per year, which alternative is preferred and what will be the total annual cost?
A process for producing the mosquito repellant Deet has an initial investment of $210,000 with annual costs of $52,000. Income is expected to be $90,000 per year. What is the payback period at i = 0% per year? At i = 12% per year?
The replacement of a digital printing machine is proposed within a year, the price of said machine is $ 350,000.00. It has been decided within the company, to deposit a monthly saving in an investment that pays 12% per annum capitalizable monthly to get the amount of the cost of the machine at the end of the year, with this information answer the following questions: a). What monthly savings must be deposited to get the capital required for the purchase of the machine? b). Considering the same information over a period of 2 years to get the capital, how much should the monthly deposits be? c). Considering the same information: a discount of $ 75,000.00 pesos is obtained if we make the payment for the machine at 6 months, how much should the six monthly payments be to get said discount?

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