.You have received bids from two manufacturers for purchase of a new dragline. The first bid (A)...
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Question:
.You have received bids from two manufacturers for purchase of a new dragline. The first bid (A) is competitive but from a company that requires payment in full on placement of order. The second bid (B) is for a higher price, but no payment is required until the machine starts digging in 3 years. Which is the preferred option?
Data:
Dragline A bid price (payment today) = $30,000,000
Dragline B bid price (payment in 3 years' time) = $40,000,000
Required return on capital (discount rate) = 15%
Time n: 3 years
Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
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