Question
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 | 9,600 | 11,300 |
annual cost | 3,900 | 3000 |
service life (Years) | 10 | 10 |
salvage value | 3,840 | 4,520 |
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 ownership?
PW of Vendor X is __________?
PW of Vendor Y is __________?
The most Economical choice is ?
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