Question
Huntsman Associates is considering upgrading its escalator equipment. Machines from vendors A and B have the same output, but have different useful lives and
Huntsman Associates is considering upgrading its escalator equipment. Machines from vendors A and B have the same output, but have different useful lives and operating costs. A's lasts four years while B's lasts three years. The discount rate for the project is 10%, and the performance for each type of equipment is the same. Costs are given below: A B t= 0 50 30 12 12 20 1 2 3 4 5 5 15 15 Ignoring taxes and depreciation, and assuming that Huntsman plans to operate the machines into the distant future, which vendor should Huntsman Associates choose?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
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