Production equipment is to be replaced immediately as it is outdated. The two be
ID: 2773030 • Letter: P
Question
Production equipment is to be replaced immediately as it is outdated. The two best alternatives are a used equipment (A) and a new automated equipment (B). The economic estimates for each are shown in the table below. The MARR is 15% per year. Which alternative is preferred?
Alternative A
Alternative B
Capital investment
$14,000
$65,000
Annual expenses
$10,000
$9,000
Useful life (years)
5
10
Market value (at end of useful life)
$8,000
$13,000
Alternative A
Alternative B
Capital investment
$14,000
$65,000
Annual expenses
$10,000
$9,000
Useful life (years)
5
10
Market value (at end of useful life)
$8,000
$13,000
Explanation / Answer
Alternative A is Preferred as it has lower capital investment.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.