Q5. High Precision Metal Company has to buy a laser cutting machine. They consider three alternatives...

Q5. High Precision Metal Company has to buy a laser cutting machine. They consider three alternatives as follows:

Alternative 1. Down payment $50,000, yearly nominal installment is 20,000 USD in a period of 8 years, and the yearly process and maintenance cost is $3000. The salvage value is $30,000 after 10 years.

Alternative 2. $80,000 USD investment and yearly nominal installment is $12,000 in a period of 10 years. The salvage value is $40,000. The yearly process and maintenance cost is $2000.

Alternative 3. 120,000 USD investment and yearly nominal cost 10,000 USD in a period of 9 years. The salvage value after 10 years is 50,000 USD. The yearly process and maintenance cost is $5000.

Which alternative is the best one if the company requires a 12% return on all investments? (Hint: you have to draw the time diagram first).

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Expert Solution

ekkarill92 answered 1 year ago

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