The City of Lubbock has decided to buy a new snow removal machine to avert the...

 

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The City of Lubbock has decided to buy a new snow removal machine to avert the occasional snowpocalypse. Thus, the city of Lubbock decided to buy a new snow removal machine. The officials can choose between two different machines: 1. The Blizzard has a $70,000.00 first cost, life of 20 years and $8,000.00 salvage value. At the end of 9 years, it will need a major overhaul costing $9,000.00. Annual maintenance and operating costs are $9,000.00. 2. The Snow Mower will cost $50,000.00, has an expected life of 10 years and has no salvage value. The annual maintenance and operating costs are expected to be $12,000.00 Using a 12.00% interest rate, which machine should be chosen? The City of Lubbock has decided to buy a new snow removal machine to avert the occasional snowpocalypse. Thus, the city of Lubbock decided to buy a new snow removal machine. The officials can choose between two different machines: 1. The Blizzard has a $70,000.00 first cost, life of 20 years and $8,000.00 salvage value. At the end of 9 years, it will need a major overhaul costing $9,000.00. Annual maintenance and operating costs are $9,000.00. 2. The Snow Mower will cost $50,000.00, has an expected life of 10 years and has no salvage value. The annual maintenance and operating costs are expected to be $12,000.00 Using a 12.00% interest rate, which machine should be chosen?

Answer rating: 100% (QA)

To determine which machine should be chosen we need to calculate the present worth of costs for each ... View the full answer