*PLEASE READ! *PLEASE READ! *PLEASE READ! *PLEASE READ! *PLEASE READ! *PLEASE RE
ID: 1170417 • Letter: #
Question
*PLEASE READ!
*PLEASE READ!
*PLEASE READ!
*PLEASE READ!
*PLEASE READ!
*PLEASE READ!
*PLEASE READ!
*PLEASE READ!
*PLEASE READ!
*PLEASE READ: POINTS ARE GIVEN FOR CLARITY AND ACCURACY****, AND ALSO DO NOT ANSWER POST IF AFTER MIDNIGHT!
(1 point) The capitalized cost of an assset is the sum of the original cost of the asset and the present value of maintaining the asset. Suppose a company is considering the purchase of two different machines. Machine 1 costs $20000 and t years from now will cost MI (t) = 4000(1 + 0.08 dollars to maintain. Machine 2 costs only $6000, but its maintenance cost at time t is M2() = 4300 dollars. If the cost of money is 5% per year compounded continuously, what is the capitalized cost of each machine? Machine 1 cost: dollars. Machine 2 cost dollars.Explanation / Answer
Maintenance costs of each machine will be discounted back to the present value after multiplying by discount factor, (e^-.05*t).
for example: for t = 1 , discount factor = (e^-.05*1) = 0.951229425
So, PV of maintenance cost of A = 4,000* (1.08) * (0.951229425) = 4,109.31
PV of maintenance cost of B = 4,300 * (0.951229425) = 4,090.29
Total cost of A for year 1 = 20,000 + 4,109.31 = $ 24,109.31
Total cost of B for year 1 = 6,000+4,090.29 = $10,090.29
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.