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The factory manager is considering the following two quotes from two vendors for purchace and maintanance of an equipment. Vendor X's estimates are all in
The factory manager is considering the following two quotes from two vendors for purchace and maintanance of an equipment. Vendor X's estimates are all in actual dollars, while Vendor Y's estimates are all in year-zero dollars. Vendor X Vendor Y Initial cost $9,500 $11,200 Annual cost $4,900 $4,000 Service life (yrs) 10 10 Salvage value $3,800 $4,480 The manager uses a before-tax real interest rate of 8% per year for economic analysis. If inflation rate is expected to average 6.48% per year over the next ten years, which vendor should the manager select that will minimize the before-tax cost of ownwership? (a) Calculate PW for each alternative (use negative sign for costs) The PW of Vendor X's estimates is $ (Round to the nearest whole number.) The PW of Vendor Y's estimates is $ (Round to the nearest whole number.) (b) The most economical alternative is O A. Vendor Y O B. Vendor XThe factory manager is considering the following two quotes from two vendors for purchace and maintanance of an equipment. Vendor X's estimates are all in actual dollars, while Vendor Y's estimates are all in year-zero dollars. Vendor X Vendor Y Initial cost $9,500 $11,200 Annual cost $4,900 $4,000 Service life (yrs) 10 10 Salvage value $3,800 $4,480 The manager uses a before-tax real interest rate of 8% per year for economic analysis. If inflation rate is expected to average 6.48% per year over the next ten years, which vendor should the manager select that will minimize the before-tax cost of ownwership? (a) Calculate PW for each alternative (use negative sign for costs) The PW of Vendor X's estimates is $ (Round to the nearest whole number.) The PW of Vendor Y's estimates is $ (Round to the nearest whole number.) (b) The most economical alternative is O A. Vendor Y O B. Vendor X
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