Help With an Investment Question
Favorites|Homepage
Subscriptions | sitemap
HOME > > Help With an Investment Question

Help With an Investment Question

[From: ] [author: ] [Date: 12-03-24] [Hit: ]
000, saves $12,000 per year in labor costs, and has a useful life of 10 years.Model B costs $42,000,......
In an effort to increase productivity, a corporation decides to purchase a new piece of equipment. Two models are available; both reduce labor costs. Model A costs $50,000, saves $12,000 per year in labor costs, and has a useful life of 10 years. Model B costs $42,000, saves $10,000 annually in labor costs, and has a useful life of 8 years. If the time value of money is 10% per annum, what piece of equipment provides a better investment?

-
NPV of A = 12000*(1-1.1^-10)/0.1 - 50,000 = $23,734.81
NPV of B = 10000(1- 1.1^-8)/0.1 - 42000 = $11,349.26

although A appears to be the clear winner, periods differ,
so we shall take 40 years of both to make assurance doubly sure

NPV of A = 23,734.81(1-1.1^-4)/0.1 = $75,236.15
NPV of B = 11,349.26(1-1.1^-5)/0.1 = $43,022.62

A provides a better investment
--------------------------------------…

-
price and quality
1
keywords: an,Question,Help,With,Investment,Help With an Investment Question
New
Hot
© 2008-2010 http://www.science-mathematics.com . Program by zplan cms. Theme by wukong .