Question
In: Finance
15. XYZ, Inc. is considering updating one of its existing machines. They will pick one from...
15. XYZ, Inc. is considering updating one of its existing machines. They will pick one from the following two machines. The first one costs $150,000 to install, $20,000 to operate per year for 10 years. It will be sold for $50,000 ten years after the installation (t=10). The second one costs $240,000 to install, $12,000 to operate per year for 16 years. It will be sold for $54,000 sixteen years after the installation (t=16). The firm’s cost of capital is 8%. What is the equivalent annual annuities of the best machine? A. $39,158.61 B. $38,902.95 C. $37,465.61 D. $37,333.70 E. $35,068.25
Solutions
Expert Solution
Solution :
The Second Machine has the best/ lowest Equivalent Annual Annuity.
The equivalent annual annuities of the best machine i.e., Second Machine = $ 37,333.70
The solution is Option D. $ 37,333.70
Please find the attached screenshots of the excel sheet containing the detailed calculation for the solution.
jeff jeffy answered 2 years agoRelated Solutions
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