up to the 5-year major repair and cleanup. Based or water plant? what is the cap
ID: 1169506 • Letter: U
Question
up to the 5-year major repair and cleanup. Based or water plant? what is the capitalized cost for the treatment evideo solution Two incinerators are being considered by a waste man 53. agement company. Design A has an initial cost of operating and maintenance costs of $800,000. S700,000, / ,UUU, VUDUl UU,UUU Uach year leading and a 4 percent/year TVOM $2,500,000, has annual and requires overhauls every cost of $1,250,000. Design B is more sophisticated, including al cost of $5,750,000, annual has operating costs of $600,000, and requires overhauls every 10 years $3,000,000. Using a 5 percent/year interest rate, determine the capitalized cost for each design and recommend which should be chosen . 5 years at a cost computer controls; it has an and maintenance at a cost ofExplanation / Answer
Net Present Value for Model 127B = -Initial Investment + Annual Income - Annual Expense + Salvage Amount
= -55000 + 19400(P/A,i,n) - 10000(P/A, i, n) + 10000(P/F, i, n)
= $12,707
Net Present Value for Model 334A = -Initial Investment + Annual Income - Annual Expense + Salvage Amount
= -85000 + 26000(P/A,i,n) - 6000(P/A, i, n)
= -$5145
Octavia Bakery should purchase Model 127B since the Net Present Value with 10 years of estimated life is more.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.