4. A new machine will cost $17,000 and will have a resale value of $14,000 after...

4. A new machine will cost $17,000 and will have a resale value of $14,000 after five years. Special tooling will cost $5,000. The tooling will have a resale value of $2,500 after five years. Maintenance will be $2,000 per year. The effect annual interest rate is 6%. The average annual cost of ownership during the next five years will be most nearly.

(A) $2,000 (B) $2,300 (C) $4,300 (D) $5,500

5. An old covered wooden bridge can be strengthened at a cost of $9,000, or it can be replaced for $40,000. The present salvage value of the old bridge is $13,000. It is estimated that the reinforced bridge will last for 20 years, will have an annual cost of $500, and will have a salvage value of a new bridge after 25 years is $15,000. Maintenance for the new bridge would cost $100 annually. The effective annual interest rate is 8%. Which is the best alternative?

(A) Strengthen the old bridge

(B) Build the new bridge

(C) Both options are economically identical (D) Not enough information is given

Solutions

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Rahul Sunny answered 1 year ago

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