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3. The Bachmann Brothers are back with another conundrum - now they are trying to decide between two rollers with the following characteristics: Rock'n Roller
3. The Bachmann Brothers are back with another conundrum - now they are trying to decide between two rollers with the following characteristics: Rock'n Roller Ravishing Roller $40000 First Cost ($) $25000 $500 $300 Operations and Maintenance ($/year) Guaranteed Service Life (years) 9 18 Rollers are worth nothing (i.e., zero) at the end of their Guaranteed Service Life. The brother's MARR is still 10 percent. One brother uses a present worth (PW) analysis assuming repeated lives to determine the preferred alternative - which roller does he prefer? b. The other brother uses the PW study period method. He assumes a study period of 9 years. At the end of 9 years, he estimates Ravishing Roller would have a salvage value of $35000. Which roller does he prefer? c. Do the brothers prefer the same roller? Why or why not? Explain the underlying rationale that leads to their preferences being either the same or different. d. If you determined the brothers prefer different rollers: calculate the range of salvage values of Ravishing Roller that needs to be assumed for the study period method (9- year study period) so that the brothers agree on the preferred roller. If you determined that the brothers prefer the same roller: do the repeated lives method and study period method always lead to the same result? Why or why not? 3. The Bachmann Brothers are back with another conundrum - now they are trying to decide between two rollers with the following characteristics: Rock'n Roller Ravishing Roller $40000 First Cost ($) $25000 $500 $300 Operations and Maintenance ($/year) Guaranteed Service Life (years) 9 18 Rollers are worth nothing (i.e., zero) at the end of their Guaranteed Service Life. The brother's MARR is still 10 percent. One brother uses a present worth (PW) analysis assuming repeated lives to determine the preferred alternative - which roller does he prefer? b. The other brother uses the PW study period method. He assumes a study period of 9 years. At the end of 9 years, he estimates Ravishing Roller would have a salvage value of $35000. Which roller does he prefer? c. Do the brothers prefer the same roller? Why or why not? Explain the underlying rationale that leads to their preferences being either the same or different. d. If you determined the brothers prefer different rollers: calculate the range of salvage values of Ravishing Roller that needs to be assumed for the study period method (9- year study period) so that the brothers agree on the preferred roller. If you determined that the brothers prefer the same roller: do the repeated lives method and study period method always lead to the same result? Why or why not
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