Using incremental rate of return, determine which of the following options is the most cost effective provided
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Question:
Using incremental rate of return, determine which of the following options is the most cost effective provided a minimum annual rate of return (MARR) of 18%, a useful life of 10 years, and the following data:
Option 1:
Initial Cost: $50,000
Annual Cost: $7,000/ year with an annual increase of $500 each year
Repair Cost at year 8: $20,000
Salvage Value: $35,000
Option 2:
Initial Cost: $35,000
Annual Cost: $9,000/ year with an annual increase of $1,000 each year
Repair Cost at year 6: $12,000
Salvage Value: $15,000
Related Book For
Engineering Economic Analysis
ISBN: 9780195168075
9th Edition
Authors: Donald Newnan, Ted Eschanbach, Jerome Lavelle
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