Two equipments A and B have initial costs of $100,000 and $120,000 and expected to generate annual savings during the first year of $88,000 and $98,000 respectively. The value of these annual savings is expected to increase by 10% per year (over previous period). Assume service life of 2 years, operating hours per year of 4500, Determine the $ savings/ hour for each equipment and select the optimal equipment based on your results. Use i = 10%.
Two equipments A and B have initial costs of $100,000 and $120,000 and expected to generate annual savings during the first year of $88,000 and $98,000 respectively. The value of these annual savings is expected to increase by 10% per year (over previous period). Assume service life of 2 years, operating hours per year of 4500, Determine the $ savings/ hour for each equipment and select the optimal equipment based on your results. Use i = 10%.
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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![Two equipments A and B have initial costs of $100,000 and $120,000 and expected
to generate annual savings during the first year of $88,000 and $98,000
respectively. The value of these annual savings is expected to increase by 10% per
year (over previous period). Assume service life of 2 years, operating hours per year
of 4500, Determine the $ savings/ hour for each equipment and select the optimal
equipment based on your results. Use i = 10%.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1a4eb84f-450b-421a-8511-501b9aeee76f%2F51ce9d10-3495-417e-ad78-254324edfd74%2Fyy3xnmm_processed.png&w=3840&q=75)
Transcribed Image Text:Two equipments A and B have initial costs of $100,000 and $120,000 and expected
to generate annual savings during the first year of $88,000 and $98,000
respectively. The value of these annual savings is expected to increase by 10% per
year (over previous period). Assume service life of 2 years, operating hours per year
of 4500, Determine the $ savings/ hour for each equipment and select the optimal
equipment based on your results. Use i = 10%.
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