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A construction company has two alternatives to buy an excavator that is to be used at a construction site for excavation of earth. The cash
A construction company has two alternatives to buy an excavator that is to be used at a construction site for excavation of earth. The cash flow details of the two alternatives are as follows; Alternative 1: Initial purchase cost $585,000, Salvage value $150,000, useful life 14 years, Operating cost: the operating cost for excavating Im3 of earth is $20. Alternative I can excavate 65 m3 of earth in one hour. Alternative 2: Initial purchase cost-$660,000, salvage value $175000, useful life 14 years, Operating cost: the operating cost for excavating Im3 of earth is $14. Alternative 2 can excavate 75 m3 of earth in one hour. If the company's minimum attractive rate of return (MARR) is 12% per year. How many hours approximately the excavators have to operate per year for the equivalent uniform annual worth of cash flows of both the alternatives to be equal
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