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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

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)

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