Question
A mechanical firm is planning to buy a large scale 3D printer that it will use for rapid prototyping in the next 10 years. Only
A mechanical firm is planning to buy a large scale 3D printer that it will use for rapid prototyping in the next 10 years. Only one 3D printer will be utilized during this period. The company is exploring to purchase a new 3D printer costing $500,000 with a useful life of 6 years. Maintenance and operating costs are $50,000 per year with an increasing rate of $ 10,000 per year. This 3D printer will provide an annual income of $100,000 during its lifetime and a salvage value of $250,000 at the end of 6 years. At that time another 3D printer is planned to be bought at a cost of $750,000 with a service life of 4 years and a salvage value of $450,000. Maintenance and operation cost for the second 3D printer is estimated to be $100,000 at the end of the 2nd year of its useful life. Annual incomes are $150,000 per year with an increasing rate of $50,000 per year until the end of its lifetime. Considering that the interest rate is 7% for the first 6 years and 9% for the next 4 years, find the present worth of these investments and if this proposal should be accepted.
Question 6 options:
| PV = -$150M, rejected |
| PV = $150M, approved |
| PV = -$75M, rejected |
| PV = $75M, approved |
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