Downtown Abbey Corp. wants to buy a new sheep-shearing machine. It has narrowed down the choice to two machines that can do the job equally well:

Machine name	The Shearilizer	Naked Sheep
Purchase price	10,000	20,000
Useful life (years)	4	5
Maintenance cost (end of each year)	5,000	3,000

The relevant discount rate is 10%. There are no taxes.

Attempt 1/10 for 9.5 pts.

Part 1

What is the net present value of all costs associated with the Shearilizer (in absolute terms)?

Submit

Attempt 1/10 for 9.5 pts.

Part 2

What is the equivalent annual cost for the Shearilizer (in absolute terms)?

Submit

Attempt 1/10 for 9.5 pts.

Part 3

What is the equivalent annual cost for the Naked Sheep (in absolute terms)?

Submit

Attempt 1/5 for 9.5 pts.

Part 4

Which machine should the company buy?

The one with the lower equivalent annual cost

The one with the higher equivalent annual cost

Submit