Problem $8$

Intro

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 $10,00020,000$

Useful life $($years$)46$

Maintenance cost $($end of each year$)6,0003,000$

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

Attempt $1/5$ for $5$ pts$.$

Part $1$

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

$0+$ decimals

Attempt $1/5$ for $5$ pts$.$

Part $2$

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

$0+$ decimals

Attempt $1/5$ for $5$ pts$.$

Part $3$

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

$0+$ decimals

Attempt $1/5$ for $1$ 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