You and your partner have become very interested in cross-country motorcycle racing and wish to purchase entry-level equipment. You have identified two alternative sets of equipment and gear. Package K has a first cost of $130000, an operating cost of $5500 per quarter, and a salvage value of $60000 after its 2-year life. Package L has a first cost of $190000 with a lower operating cost of $2300 per quarter and an estimated $13000 salvage value after its 4-year life. Which package offers the lower present worth analysis at an interest rate of 12.00% per year, compounded quarterly? (Include a minus sign if necessary.) The present worth of package K is $ 121243.75| and that of package L is $ -210243.75 Package L offers the lower present worth.
You and your partner have become very interested in cross-country motorcycle racing and wish to purchase entry-level equipment. You have identified two alternative sets of equipment and gear. Package K has a first cost of $130000, an operating cost of $5500 per quarter, and a salvage value of $60000 after its 2-year life. Package L has a first cost of $190000 with a lower operating cost of $2300 per quarter and an estimated $13000 salvage value after its 4-year life. Which package offers the lower present worth analysis at an interest rate of 12.00% per year, compounded quarterly? (Include a minus sign if necessary.) The present worth of package K is $ 121243.75| and that of package L is $ -210243.75 Package L offers the lower present worth.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 1.1CE
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Transcribed Image Text:You and your partner have become very interested in cross-country motorcycle racing and wish to purchase entry-level equipment.
You have identified two alternative sets of equipment and gear. Package K has a first cost of $130000, an operating cost of
$5500 per quarter, and a salvage value of $60000 after its 2-year life. Package L has a first cost of $190000 with a lower operating
cost of $2300 per quarter and an estimated $13000 salvage value after its 4-year life. Which package offers the lower present worth
analysis at an interest rate of 12.00% per year, compounded quarterly? (Include a minus sign if necessary.)
The present worth of package K is $ 121243.75| and that of package L is $ -210243.75
Package L offers the lower present worth.
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