There are two alternatives for purchasing a concrete mixer. Both the alternatives have same useful life. The cash flow details of alternative are as follows; Alternative 1: Initial Purchase Cost= Rs3,00,000, annual operating and maintenance cost = Rs20,000, Annual revenue= Rs50000, Expected salvage value = Rs125,000; useful life = 5 years. Alternative 2: Initial Purchase Cost = Rs2,00,000, annual operating and maintenance cost = Rs35,000, Annual revenue= Rs45000, Expected salvage value = Rs70,000, useful life = 5 years. Use Present Worth method to evaluate the alternatives and recommend the best option, if the rate of interest is 10% per year

There are two alternatives for purchasing a concrete mixer. Both the alternatives have same useful life. The cash flow details of alternative are as follows; Alternative 1: Initial Purchase Cost= Rs3,00,000, annual operating and maintenance cost = Rs20,000, Annual revenue= Rs50000, Expected salvage value = Rs125,000; useful life = 5 years. Alternative 2: Initial Purchase Cost = Rs2,00,000, annual operating and maintenance cost = Rs35,000, Annual revenue= Rs45000, Expected salvage value = Rs70,000, useful life = 5 years. Use Present Worth method to evaluate the alternatives and recommend the best option, if the rate of interest is 10% per year

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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