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Ruff Motors needs to select an assembly line for producing their new SUV. They have two options: Option A is a highly automated assembly line
Ruff Motors needs to select an assembly line for producing their new SUV. They have two options:
Option A is a highly automated assembly line that has a large upfront cost but low maintenance
cost over the years. This option will cost $ million today with a yearly operating cost of $ million.
The assembly line will last for years and be sold for $ million in years.
Option B is a cheaper alternative with less technology, a longer life, but higher operating costs.
This option will cost $ million today with an annual operating cost of $ million. This assembly
line will last for years and be sold for $ million in years.
The firms cost of capital is Assume a tax rate of zero percent.
The equivalent annual cost EAC for Option A is $million.
The equivalent annual cost EAC for Option B is $million.
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