Zoysia University must purchase mowers for its landscape department. The university can buy six EVF mowers that cost $8,400 each and have annual, year-end maintenance costs of $1,850 per mower. The EVF mowers will be replaced at the end of Year 4 and have no value at that time. Alternatively, Zoysia can buy seven AEH mowers to accomplish the same work. The AEH mowers will be replaced after seven years. They each cost $7,400 and have annual, year-end maintenance costs of $2,150 per mower. Each AEH mower will have a resale value of $900 at the end of seven years. The university’s opportunity cost of funds for this type of investment is 8 percent. Because the university is a nonprofit institution, it does not pay taxes. It is anticipated that whichever manufacturer is chosen now will be the supplier of future mowers. What is the EAC of each type of mower? (Your answers should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Zoysia University must purchase mowers for its landscape department. The university can buy six EVF mowers that cost $8,400 each and have annual, year-end maintenance costs of $1,850 per mower. The EVF mowers will be replaced at the end of Year 4 and have no value at that time. Alternatively, Zoysia can buy seven AEH mowers to accomplish the same work. The AEH mowers will be replaced after seven years. They each cost $7,400 and have annual, year-end maintenance costs of $2,150 per mower. Each AEH mower will have a resale value of $900 at the end of seven years. The university’s opportunity cost of funds for this type of investment is 8 percent. Because the university is a nonprofit institution, it does not pay taxes. It is anticipated that whichever manufacturer is chosen now will be the supplier of future mowers. What is the EAC of each type of mower? (Your answers should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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| Zoysia University must purchase mowers for its landscape department. The university can buy six EVF mowers that cost $8,400 each and have annual, year-end maintenance costs of $1,850 per mower. The EVF mowers will be replaced at the end of Year 4 and have no value at that time. Alternatively, Zoysia can buy seven AEH mowers to accomplish the same work. The AEH mowers will be replaced after seven years. They each cost $7,400 and have annual, year-end maintenance costs of $2,150 per mower. Each AEH mower will have a resale value of $900 at the end of seven years. The university’s |
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