An American multinational company is now considering two mutually exclusive alternatives. for the environmental protection equipment...
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An American multinational company is now considering two mutually exclusive alternatives. for the environmental protection equipment at its manufacturing plant in the United Kingdom. One of these alternatives must be selected. The estimated cash flows for each alternative are listed in the below table. Capital investment Annual expenses Market value at end of useful life Useful life Alternative A (20,000+D8 x 1,000) (5,500+ D8 x 1,000) (1,000+ D8 x 1,000) 5 years Alternative B (38,000 + D8 1,000) (4,000+ D8 x 1,000) (4.200+ D8 x 1,000) 10 years Assume that the equipment will be needed indefinitely and the firm's MARR relative to British pound (GBP) is 20% per year. a) (i) To compare which environmental protection equipment alternative is better, what assumption do you need to make (Repeatability assumption or Co-terminated assumption)? (1 mark) (ii) Using your assumption above, analyse which environmental protection equipment alternative should be selected? Use 4 decimal places of the compound interest factors to do your calculation. Show detailed steps of your analysis. (Correct your final answer to 2 decimal places.) (7 marks) An American multinational company is now considering two mutually exclusive alternatives. for the environmental protection equipment at its manufacturing plant in the United Kingdom. One of these alternatives must be selected. The estimated cash flows for each alternative are listed in the below table. Capital investment Annual expenses Market value at end of useful life Useful life Alternative A (20,000+D8 x 1,000) (5,500+ D8 x 1,000) (1,000+ D8 x 1,000) 5 years Alternative B (38,000 + D8 1,000) (4,000+ D8 x 1,000) (4.200+ D8 x 1,000) 10 years Assume that the equipment will be needed indefinitely and the firm's MARR relative to British pound (GBP) is 20% per year. a) (i) To compare which environmental protection equipment alternative is better, what assumption do you need to make (Repeatability assumption or Co-terminated assumption)? (1 mark) (ii) Using your assumption above, analyse which environmental protection equipment alternative should be selected? Use 4 decimal places of the compound interest factors to do your calculation. Show detailed steps of your analysis. (Correct your final answer to 2 decimal places.) (7 marks)
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Answer rating: 100% (QA)
a i Assumption Since both alternatives have different useful lives 5 and 10 years we need to make an assumption to compare them using present worth me... View the full answer
Related Book For
Engineering Economy
ISBN: 978-0133439274
16th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Posted Date:
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