Consider the following EOY cash flows for two mutually exclusive types of microscope for a geoscience lab (one must be chosen, assume that annual benefits of both types are similar). The MARR is 5% per year. Microscope A Microscope B Capital investment Annual expenses Useful life Market value at end of useful life $60,000 $85,000 $1,400 $1,500 12 years $0 18 years $12,000 a. Determine which alternative should be selected if the repeatability assumption applies. b. Determine which alternative should be selected if the analysis period is 18 years, the repeatability assumption does not apply, and a microscope can be leased (i.e. borrowed) for $10,000 per year after the useful life of either microscope is over.
Consider the following EOY cash flows for two mutually exclusive types of microscope for a geoscience lab (one must be chosen, assume that annual benefits of both types are similar). The MARR is 5% per year. Microscope A Microscope B Capital investment Annual expenses Useful life Market value at end of useful life $60,000 $85,000 $1,400 $1,500 12 years $0 18 years $12,000 a. Determine which alternative should be selected if the repeatability assumption applies. b. Determine which alternative should be selected if the analysis period is 18 years, the repeatability assumption does not apply, and a microscope can be leased (i.e. borrowed) for $10,000 per year after the useful life of either microscope is over.
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 17E
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