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Trying to build a spreadsheet to help with the following practice problem: Company spent 5500K over 6 months to study 3 acquisition options for a
Trying to build a spreadsheet to help with the following practice problem:
Company spent 5500K over 6 months to study 3 acquisition options for a project that will last 5 years and they'll sell the machines after 5 years for 10% of acquisition cost: Buy Machine A a. Cost: b. Annual Operating Cost of $85,000 c. SVC life of 5 years d. Site remediation: -$1,130,000 Buy Machine B a. Cost: b. Annual Operating Cost of $100,000 c. SVC life of 5 years d Site remediation: -$1,050,000 Subcontract to Company C a. Annual cost: (requires 4-year commitment) b. option renewable for an ADDITIONAL 4 YEARS at year c. (All costs are included in this subcontract) -Using a pre-tax MARR of 15%, which option is most attractive and why (Taxes and depreciation can be ignored) -What happens if the project gets cancelled after 2 years?
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