Zambrota Inc, an Italian company, is considering the following two equipment alt

Question

Zambrota Inc, an Italian company, is considering the following two equipment alternatives for their plant in Omaha. The cost information for the two machines are considered in the table below 4. Machine X Initial Cost $100,000 Benefits year $20,000 for the first 10 years and MachineY $85.000 $9,500 per year for 20 $10,000 for the next 5 years Life Salvage value $35,0 MARR 15 years Salvage value $35000 $20,000 8% The net present worth (NPW) of machine X is ata for Problems 5 and 6 n an equipment acquisition proposal, Home Plus Enterprise has worked out to deal on the nterest rate with the vendor. The equipment is being financed for 4 years with monthly ayments. The deal with the vendor is show below. The interest rate is 1% per month for the first 20 payments and for the rest of the payments, the interest rate would be 0.5 % per month. The equipment cost is $500,000. 5. Determine the monthly payment for the first 20 months.

Explanation / Answer

4) The Net present value for machine X= -$ 100,000 + $ 20,000 / ( 1+0.08)1 + $ 20,000 / ( 1+0.08)2 + $ 20,000 / ( 1+0.08)3 + $ 20,000 / ( 1+0.08)4 + $ 20,000 / ( 1+0.08)5 + $ 20,000 / ( 1+0.08)6 + $ 20,000 / ( 1+0.08)7 + $ 20,000 / ( 1+0.08)8 + $ 20,000 / ( 1+0.08)9 + $ 20,000 / ( 1+0.08)10 + $ 10,000 /(1+0.08)11 + $ 10,000 /(1+0.08)12 + $ 10,000 /(1+0.08)13 + $ 10,000 /(1+0.08)14 + $ 10,000 /(1+0.08)15 + $ 35,000 / ( 1+0.08)15

Net present value for Machine X = $63,729.06

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5) To find the monthly payment for the first 20 months:-

PMT= PV / 1 - ( 1+r)-n / r

r = 0.01/12

PMT = $ 500,000 / 1 - ( 1+0.000833)-40/ 0.000833

PMT = $ 12,714.61

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