Problem 4 (25 pts). Granny Goose is trying to decide to buy one among three alternative...

 

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Problem 4 (25 pts). Granny Goose is trying to decide to buy one among three alternative tractors necessary to upgrade her farming business. Data concerning the 3 tractor models, namely TORO, PEGASUS, and TAMARAW are shown. Which tractor should Granny Goose choose at a MARR of 7%? TORO PEGASUS TAMARAW Initial Cost (Php) 45,000 56,000 24,000 General Maintenance Cost in year 2 and year 4 (Php) 31,000 20,000 35,000 Overhaul Cost in year 5 (Php) 0 10,000 5,000 Annual Revenue 70,000 70,000 70,000 Salvage Value (Php) at end-of-life (EOL) 12,000 15,000 0 Useful Life (years) 8 5 6 B/C Ratio 3.53 4.08 3.93 Additional Guidelines: 1. Assume co-termination using the TAMARAW's useful life. Evaluate using the B/C Ratio. 2. Show incremental CFs spread-out over the study period. Problem 4 (25 pts). Granny Goose is trying to decide to buy one among three alternative tractors necessary to upgrade her farming business. Data concerning the 3 tractor models, namely TORO, PEGASUS, and TAMARAW are shown. Which tractor should Granny Goose choose at a MARR of 7%? TORO PEGASUS TAMARAW Initial Cost (Php) 45,000 56,000 24,000 General Maintenance Cost in year 2 and year 4 (Php) 31,000 20,000 35,000 Overhaul Cost in year 5 (Php) 0 10,000 5,000 Annual Revenue 70,000 70,000 70,000 Salvage Value (Php) at end-of-life (EOL) 12,000 15,000 0 Useful Life (years) 8 5 6 B/C Ratio 3.53 4.08 3.93 Additional Guidelines: 1. Assume co-termination using the TAMARAW's useful life. Evaluate using the B/C Ratio. 2. Show incremental CFs spread-out over the study period.

Answer rating: 100% (QA)

1PEGASUS should be the chosen tractor at a MARR of 7 The BC ratio for PEGASUS is 408 which is higher ... View the full answer