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Three alternatives have the following cost and annual benefit data associated with them: The loan payments are calculated using an interest rate of 10%, a life equal to the life of the machine, and a down payment of 30%. Use a MARR of 12% and determine which machine, if any, should be purchased. Use incremental rate of return for your analysis. Do not forget to use DN in the analysis.

Three alternatives have the following cost and annual benefit data associated with them: The loan payments are calculated using an interest rate of 10%, a life equal to the life of the machine, and a down payment of 30%. Use a MARR of 12% and determine which machine, if any, should be purchased. Use incremental rate of return for your analysis. Do not forget to use DN in the analysis.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Three alternatives have the following cost and annual benefit data associated with them:

The loan payments are calculated using an interest rate of 10%, a life equal to the life of the machine, and a down payment of 30%. Use a MARR of 12% and determine which machine, if any, should be purchased. Use incremental rate of return for your analysis. Do not forget to use DN in the analysis.

Data Alt. 1 Alt. 2 Alt .3 Useful Life, Years First Cost Annual Benefit 10 10 10 $1,325,000 265,000 Annual M&O Costs 95,000 AnnualM&O Gradient 2,300 145,000 150,946 $1,980,000 589,000 97,000 2,100 205,000 225,565 $1,650,000 435,000 91,000 1,980 178,000 187,971 Salvage Value Loan Payment
Transcribed Image Text:Data Alt. 1 Alt. 2 Alt .3 Useful Life, Years First Cost Annual Benefit 10 10 10 $1,325,000 265,000 Annual M&O Costs 95,000 AnnualM&O Gradient 2,300 145,000 150,946 $1,980,000 589,000 97,000 2,100 205,000 225,565 $1,650,000 435,000 91,000 1,980 178,000 187,971 Salvage Value Loan Payment
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