Two machines are being considered for purchase. The Sande 10 costs $36 000 new and is estimated to last five years. The cost to replace the Sande 10 will increase by 5% each year. Annual operation and maintenance costs are $2 400. It will have a trade-in (salvage) value of $3 000. The Sande 20 costs $76 000 to buy, but it will last 10 years and will have a trade-in (salvage) value of $4 000. The cost of operation and maintenance is $1 400 per year. Compare the two machines using present worth analysis and state the basis of your comparison. Include a cash-flow diagram for each alternative. Assume all interest rates at 6% per year unless otherwise stated. The total cost of the Sande 10 is $ The total cost of the Sande 20 is $ The Sande (Click to select) is cheaper than the Sande (Cick to select)

Two machines are being considered for purchase. The Sande 10 costs $36 000 new and is estimated to last five years. The cost to replace the Sande 10 will increase by 5% each year. Annual operation and maintenance costs are $2 400. It will have a trade-in (salvage) value of $3 000. The Sande 20 costs $76 000 to buy, but it will last 10 years and will have a trade-in (salvage) value of $4 000. The cost of operation and maintenance is $1 400 per year. Compare the two machines using present worth analysis and state the basis of your comparison. Include a cash-flow diagram for each alternative. Assume all interest rates at 6% per year unless otherwise stated. The total cost of the Sande 10 is $ The total cost of the Sande 20 is $ The Sande (Click to select) is cheaper than the Sande (Cick to select)

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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