A construction company is considering to acquire a new equipment.Table 1 is the information of two alternatives for this new equipment. Complete the following questions according to the PW analysis The after tax market minimum attractive acquire

(1) which alternative should the company acquire?

(2)if the inflation rate is 2% per year and the base year is year 0,whic company should you choose?

PW is Present Value

use Present Value method to analyze

Table 1 Capital investment 9000 30000 9000 3000 Annual benefit (increases per year as the inflation rate if inflation is considered) Depreciation method Straight Line 200% Declining Balance 3 years 10 Depreciation life Salvage Value Useful life Market value (increases per year as the inflation rate if inflation is considered) 3 years 2000 5 years 2000 5 years 2000 A construction company is considering to acquire a new equipment. Table 1 is the information of two alternatives for this new equipment. Complete the following questions according to the PW analysis. The after tax market Minimum Attractive Rate of Return (MARR) is 12% per year. 4.1 Which alternative should the company acquire? (15%) 4.2 If the inflation rate is 2% per year and the base year is year 0, which alternative should the company acquire? (15%) 22 Table 1 9000 30000 3000 9000 Capital investment Annual benefit (increases per year as the inflation rate if inflation is considered) Depreciation method Straight Line 200% Declining Balance 3 years 0 Depreciation life Salvage Value Useful life Market value (increases per year as the inflation rate if inflation is considered) 3 years 2000 5 years 2000 5 years 2000