Question: There are two mutually exclusive projects, where the basic information is provided below. Assume a DN alternative does not exist. MARR is 10% per year.
There are two mutually exclusive projects, where the basic information is provided below. Assume a DN alternative does not exist. MARR is 10% per year. Which project do you choose and why?
|
| Long term | Short Term (Lease) |
| Initial Cost | $45,000 | $15,000 |
| Major overhaul costs (every ten years) | $12,000 | Not existent |
| Minor overhaul costs (every 5 years) | $6000 | Not existent |
| Annual Operating cost | $2000 | $1500 |
| Useful Life | Infinity | 10 |
| Salvage value | $1,500 | $2,500 (deposit return) |
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