Mansour, a farmer in BaniSweif, is considering the purchase of a new soil cultivating machine, either the type A or B. The minimum acceptable rate of return is 0.08. The table below provides all the necessary information for the two types. A B Initial Cost $6700 $16900 Annual Operation and Maintenance cost Annual Benefit $1500 $1200 $4000 54500 Salvage Value Useful Life, in years $1000 $3500 3 6 Determine the rate of return on machine A What is the incremental rate of return (M/c B - M/c A)? Using the above analysis, decide which machine should be bought:
Mansour, a farmer in BaniSweif, is considering the purchase of a new soil cultivating machine, either the type A or B. The minimum acceptable rate of return is 0.08. The table below provides all the necessary information for the two types. A B Initial Cost $6700 $16900 Annual Operation and Maintenance cost Annual Benefit $1500 $1200 $4000 54500 Salvage Value Useful Life, in years $1000 $3500 3 6 Determine the rate of return on machine A What is the incremental rate of return (M/c B - M/c A)? Using the above analysis, decide which machine should be bought:
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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