Q.5. Following table shows the EOY cash flows for two mutually exclusive alternatives (one must be...

Q.5. Following table shows the EOY cash flows for two mutually exclusive alternatives (one must be chosen). The alternatives represent all-in-one (AIO) printers for office use applications. AIO Printer A AIO Printer B Capital investment, $ 6,000 10,000 Annual operating expenses, $ 1,500 1,200 Market value, $ 1,000 1,500 Useful life, years 5 7 The MARR is 15% per year. Determine (using FW method) which alternative should be selected if the analysis period is 7 years, the repeatability assumption does not apply, and a printer can be leased for $3,600 per year after the useful life of either printer is over.

Expert Solution

Analysis Period is 7 Years
	Printer A	Printer B
Investment	6,000.00	10,000.00
Opearating Expense	1,500.00	1,200.00
Salvage Value	1,000.00	1,500.00
Useful Life	5.00	7.00
MARR	15.00%	15.00%

FW	=-6000(2.011357)-1500(6.7424)-1000	=-10000(2.66002)-1200(11.0068)-1500
	-23,182	-41308.36
Lease for 2 Years	=3600*4.973081	0
	17,903
FW	-5,279

Printer A should be selected, since negative FW is less in Printer A

ekkarill92 answered 2 years ago

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