Austin General Hospital is evaluating new office equipment offered by three companies. In each case the interest

Question:

Austin General Hospital is evaluating new office equipment offered by three companies. In each case the interest rate is 15% and the useful life of the equipment is 4 years. Use NPW analysis to determine the company from which you should purchase the equipment.

Company Company Company

A B C

First cost $15,000 $25,000 $20,000

Maintenance and 1,600 400 900

Operating costs

Annual benefit 8,000 13,000 11,000

Salvage value 3,000 6,000 4,500

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...