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The costs and revenues of 2 alternatives for a machine are given below. Determine which alternative is economically viable using the present value method when
The costs and revenues of 2 alternatives for a machine are given below. Determine which alternative is economically viable using the present value method when 20.56% annual discount rate compounded 4-month maturity. Parameters 1. Machine 2. Machine Initial investment cost 300,000*(1+1/10) $ 300,000*(1+2*1/10) $ Salvagecost(based on initialinvestmentcost) 25% 20% Annual Operating Cost For The First Year 15,000*(1+3*ID/10) $ 15,000*(1+8*ID/10) $ Annual increase rate of operating cost 18% 22% First Year Income 100,000*(2+ID/10) $ 100,000*(3+3'ID/10) $ Annual decrease rate or amount of Income 5,000 $ 1.5% Economic life 10 years 16 years
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