The capitalized cost of an asset is the sum of the original cost of the asset...
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The capitalized cost of an asset is the sum of the original cost of the asset and the present value of maintaining the asset. Suppose a company is considering the purchase of two different machines. Machine A costs $10,000 and t years from now will cost MA (t) = 1,000 (1 + 0.05t) dollars per year to maintain. Machine B costs $12,500, but its maintenance cost at time t is MB (t) = 1, 150 dollars per year. If the cost of money is 9% per year compounded continuously, what is the capitalized cost of each machine? Which machine should the company purchase? The capitalized cost of an asset is the sum of the original cost of the asset and the present value of maintaining the asset. Suppose a company is considering the purchase of two different machines. Machine A costs $10,000 and t years from now will cost MA (t) = 1,000 (1 + 0.05t) dollars per year to maintain. Machine B costs $12,500, but its maintenance cost at time t is MB (t) = 1, 150 dollars per year. If the cost of money is 9% per year compounded continuously, what is the capitalized cost of each machine? Which machine should the company purchase?
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To find the capitalized cost of each machine we need to calculate the present value of the maintenance costs and add it to the original cost of the ma... View the full answer
Related Book For
Calculus And Its Applications
ISBN: 9780134437774
14th Edition
Authors: Larry Goldstein, David Lay, David Schneider, Nakhle Asmar
Posted Date:
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