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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