Question text

8.75Marks

Montreal Construction needs to replace one of their heavy machines. They are considering buying either Mach X or Mach Y, which have the following data:

Data	Mach X	Mach Y
Life, Years	6	4
First Cost (FC)	$210,000	$150,000
Annual Benefit (AB)	90,000	87,000
increasing annually by	1,200	1,100
Annual Maintenance & Operating Cost (M&O)	18,000	17,000
increasing annually by	1,000	900
Salvage Value	120,000	92,000

The Accounting Department of Montreal Construction reveals that a loan must be secured to purchase any machine. The loan data are as follows:

purchase any machine. The loan data are as follows:

Data	Mach X	Mach Y
Down Payment (% of FC)	16%	20%
Loan Period, Years	6	4
Annual Loan Payment	$46,611	$42,032

The loan payments will be made annually and the bank charged 15% interest. Montreal Construction assumes MARR = 12%.

The analysis period, if you are going to do a Present Worth analysis, is close to:

4 years

6 years

10 years

12 years

24 years

SKIP

For Present or Annual Worth analyses you should use an interest rate of:

10%

Montreal Construction needs to replace one of their heavy machines. They are considering buying either Mach X or Mach Y, which have the following data:

Data	Mach X	Mach Y
Life, Years	6	4
First Cost (FC)	$210,000	$150,000
Annual Benefit (AB)	90,000	87,000
increasing annually by	1,200	1,100
Annual Maintenance & Operating Cost (M&O)	18,000	17,000
increasing annually by	1,000	900
Salvage Value	120,000	92,000

The Accounting Department of Montreal Construction reveals that a loan must be secured to purchase any machine. The loan data are as follows:

Data	Mach X	Mach Y
Down Payment (% of FC)	16%	20%
Loan Period, Years	6	4
Annual Loan Payment	$46,611	$42,032

The loan payments will be made annually and the bank charged 15% interest. Montreal Construction assumes MARR = 12%.

The analysis period, if you are going to do a Present Worth analysis, is close to:

4 years

6 years

10 years

12 years

24 years

SKIP

For Present or Annual Worth analyses you should use an interest rate of:

10%

12%

15%

16%

20%

SKIP

The Annual Worth for Mach X is close to:

$28,684

$29,904

$30,544

$32,437

$33,940

SKIP

The Annual Worth for Mach Y is close to:

$35,904

$36,840

$37,611

$38,732

$40,684

SKIP

Recommend which machine to purchase:

Mach X

Mach Y

more negotiation with the vendor needed

None

X and Y are equally preferred

SKIP