Question
Sea Farming is using a water pump to drain some ditches in case of heavy rain. The old pump is in need of replacement and
Sea Farming is using a water pump to drain some ditches in case of heavy rain. The old pump is in need of replacement and the company has two offers.
The first comes from Alstermo AB in Sweden. The offer amounts to an investment of £200 000 and yearly operational cost of £50 000.
The other offer comes from Offshore Equipment Ltd outside Birmingham. This offer amounts to only £90 000 and a yearly operational cost of £50 000
The pump from Alstermo AB will last for 9 years before needed to be replaced and the other pump will be replaced after 6 years.
This is a tricky situation and you are asked to assist with full analysis of the offers and a proposal of what to decide for. The required rate Sea Farming is using for this type of investment is 12%.
Step by Step Solution
3.39 Rating (152 Votes )
There are 3 Steps involved in it
Step: 1
Scenario 1 Alstermo AB Investment cost 200000 Yearly operational cost 50000 Pump lifespan 9 yea...
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Smith and Roberson Business Law
Authors: Richard A. Mann, Barry S. Roberts
15th Edition
1285141903, 1285141903, 9781285141909, 978-0538473637
