There are two alternatives for purchasing a concrete mixer. Both the alternatives have same useful life. The cash flow details of alternative are as follows; Alternative 1: Initial Purchase Cost= Rs3,00,000, annual operating and maintenance cost = Rs20,000, Annual revenue= Rs50000, Expected salvage value = Rs125,000; useful life = 5 years. Alternative 2: Initial Purchase Cost = Rs2,00,000, annual operating and maintenance cost = Rs35,000, Annual revenue= Rs45000, Expected salvage value = Rs70,000, useful life = 5 years. Use Present Worth method to evaluate the alternatives and recommend the best option, if the rate of interest is 10% per year
There are two alternatives for purchasing a concrete mixer. Both the alternatives have same useful life. The cash flow details of alternative are as follows; Alternative 1: Initial Purchase Cost= Rs3,00,000, annual operating and maintenance cost = Rs20,000, Annual revenue= Rs50000, Expected salvage value = Rs125,000; useful life = 5 years. Alternative 2: Initial Purchase Cost = Rs2,00,000, annual operating and maintenance cost = Rs35,000, Annual revenue= Rs45000, Expected salvage value = Rs70,000, useful life = 5 years. Use Present Worth method to evaluate the alternatives and recommend the best option, if the rate of interest is 10% per year
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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There are two alternatives for purchasing a concrete mixer. Both the alternatives have same
useful life. The cash flow details of alternative are as follows;
Alternative 1: Initial Purchase Cost= Rs3,00,000, annual operating and maintenance cost =
Rs20,000, Annual revenue= Rs50000, Expected salvage value = Rs125,000; useful life = 5
years.
Alternative 2: Initial Purchase Cost = Rs2,00,000, annual operating and maintenance cost =
Rs35,000, Annual revenue= Rs45000, Expected salvage value = Rs70,000, useful life = 5
years.
Use Present Worth method to evaluate the alternatives and recommend the best option, if the
rate of interest is 10% per year
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