Question

C a ngo are two mutually exclusive alternatives with different lives Based on the data provided and the LCM approach, determine the correct equations to find PW of each machine at an interest rate of 12% per year. Machine A Machine B Initial costs -85.000 - 75.000 Annual cost, $/year -10,000 - 15,000 Salvage values 10.000 25.000 Ufe, years O PWA-25,000 -10.0001P/A.12%,.3) +10,0001P/F.12.3) PWB-75.000 - 15.00PA, 12%,2)-75.000 P/E.125425000/5,12. O PWA-85.000 - 10.000 P/A 12%.3) 10.0001P/E 12.8 PW -75.000 - 15.00PVA 13% 25.000 P/F 12. P -5000- 1 A 1 VE12 Pw -75.000 -15.DOOTPA 1250 - 50.DOOPVE,12% 4 PwA6 .000 - 10. 00PYA 1 10. PVF.12

Answer 1

Correct Answer:

D

Working Note:

PW of machine A = -85000 - 10000*(P/A, 12%, 8) + 10000*(P/F, 12%, 8)

PW of machine B = -75000 - 15000*(P/A, 12%, 8) - 75000*(P/F, 12%, 4) + 25000*(P/F, 12%, 4) + 25000*(P/F, 12%, 8)

Or

PW of machine B = -75000 - 15000*(P/A, 12%, 8) - 50000*(P/F, 12%, 4) + 25000*(P/F, 12%, 8)