Question

In: Economics

Which equipment is preferred if the firm’s interest rate is 9%?  In PW terms how great is...

  1. Which equipment is preferred if the firm’s interest rate is 9%?  In PW terms how great is the difference?

Alternative

Equipment  A

Equipment  B

First Cost

$55,000

$25,000

Annual O & M

3,900

4,200

Salvage Value

0

5000

Overhaul (Year 6)

10000

Not required

Life, in years.

10

5

Solutions

Expert Solution

Therefore, Equipment B is better because the NPV is less negative than Equipment A.

Please don't forget to rate the answer if its helpful, thank you.

Rahul Sunny answered 8 months ago
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