Ramsis is a heavy equipment rental company. It is considering the purchase of Tower crane at...
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Ramsis is a heavy equipment rental company. It is considering the purchase of Tower crane at a price of BD 775,000. This crane is expected to operate for 16 years before retirement with no salvage value at the end. The company is planning to rent the crane for BD 108,000 per year starting year 5 and the rental increases by 10% thereafter. Cost of this maintenance is expected to be BD 15,000 each year. a) What is the discounted payback period, if the MARR is 6% per year? b) In your engineering analysis study, which method would you select (Payback or Present worth) to solve this problem? And why? Ramsis is a heavy equipment rental company. It is considering the purchase of Tower crane at a price of BD 775,000. This crane is expected to operate for 16 years before retirement with no salvage value at the end. The company is planning to rent the crane for BD 108,000 per year starting year 5 and the rental increases by 10% thereafter. Cost of this maintenance is expected to be BD 15,000 each year. a) What is the discounted payback period, if the MARR is 6% per year? b) In your engineering analysis study, which method would you select (Payback or Present worth) to solve this problem? And why?
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The detailed answer for the above question is provided below 1 Increment in rent 10 Future value present value 1 10 N 11 N Year 0 cash flows 775000 Ye... View the full answer
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Accounting Texts and Cases
ISBN: 978-1259097126
13th edition
Authors: Robert Anthony, David Hawkins, Kenneth Merchant
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