Question
In: Finance
A manufacturing company is considering two mutually exclusive alternatives. Alternatives &nb
A manufacturing company is considering two mutually exclusive alternatives.
Alternatives
Alt. A Alt. B
Initial
cost
$ 42,500 $ 70,000
Annual costs
O &
M
$ 6,000 $ 4,000
Annual savings $
18,500 $ 20,000
Residual value $
12,000 $ 25,000
Shelf
life
3 years 6 years
What would be the "advantage" in annual terms of
Alternative B versus Alternative A at 15% interest?
Select one:
a. $ 3020
b. $ 3500
c. $ 7436
d. Alternative B does not have an annual advantage over Alt. B at
15% interest.
Solutions
Expert Solution
Correct answer: a. $3020
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
Please note: There is slight difference due to rounding off effect.
jeff jeffy answered 1 year agoRelated Solutions
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An American multinational company is now considering two mutually exclusive alternatives for the environmental protection equipment...
An American multinational company is now considering two
mutually exclusive alternatives for the environmental protection
equipment at its manufacturing plant in the United Kingdom. One of
these alternatives must be selected. The estimated cash flows for
each alternative are listed in the below table.
Alternative A
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Capital investment
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Annual expenses
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An American multinational company is now considering two mutually exclusive alternatives for the environmental protection equipment...
An American multinational company is now considering two
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Alternative B
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Annual expenses
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£ 4,000
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£ 4,200
Useful
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10 years
Assume that the equipment...
An American multinational company is now considering two mutually exclusive alternatives for the environmental protection equipment...
An American multinational company is now considering two
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0
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($10,000)
1
4,500
0
2
4,500
0
3
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