Question: 3 0 - BuildPro Contractors, a major player in the construction industry, is preparing for a large - scale infrastructure project that requires the purchase

30- BuildPro Contractors, a major player in the construction industry, is preparing for a large-scale infrastructure project that requires the purchase of new heavy-duty excavation equipment. Two suppliers have submitted bids, each offering equipment with different cost structures and features. Supplier X proposes equipment with an initial cost of $45,000, an annual maintenance and operation (M&O) cost of $6,000 per year, and a salvage value of $7,000 at the end of its 8-year useful life. Supplier Y offers equipment priced at $50,000, with lower annual M&O costs of $5,500 per year and a higher salvage value of $9,000 at the end of its 10-year useful life. BuildPros financial team evaluates investments using a MARR of 15% per year. Additionally, for projects with flexible timelines, BuildPro prefers to conduct evaluations over a fixed 7-year study period, regardless of the equipment's actual useful life.
i. Calculate the present worth cost for each suppliers equipment over their respective useful lives. Which option should BuildPro choose?
ii. Using a 7-year study period for evaluation and assuming salvage values remain constant, which suppliers equipment would be the better choice?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!