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PLEASE DO ANSWER IMMEDIATELY B. Equivalent Annual Cost of a Capital Investment A small food processing company is shifting from using bottles as packaging to
PLEASE DO ANSWER IMMEDIATELY
B. Equivalent Annual Cost of a Capital Investment A small food processing company is shifting from using bottles as packaging to using a vacuum sealer. This is to facilitate easier transportation of goods for online sales. It can either choose the semi-automated (SA) or the fully-automated (FA) model. Relevant information are as follows: Purchase price Salvage value Annual repair cost Major maintenance cost to be incurred at the end of 2nd year Major maintenance cost to be incurred at the end of 4th year Annual operating cost Useful life in years Implicit interest rate SA FA 20,000 45,000 3,000 8,000 2000 3000 4000 5000 10000 8000 3 5 8% 8% Required: (Round off PV Factors to 5 decimal places.) 3. What is the equivalent annual cost of using the semi-automated vacuum sealer (5 points)? 4. What is the effective annual cost of using the fully-automated vacuum sealer (5 points)? 5. Which is the better model (1 point)? 6. What is the net annual benefit of using the better model than the other (1 point)? 7. Guided by your answers in numbers 3 to 6, interpret your suggested choice of model (3 points)Step by Step Solution
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