PS 12 - Different Useful Lives - Co-terminated

PS 12 - Different Useful Lives - Co-terminated - Problem...

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IE 150 Problem Set 12 Different Useful Lives – Co-terminated Instructions:  Write/Type/Print your answers on yellow pad or bond paper (NO A4’s). Use a different sheet per  “long” problem. Use phrases  to describe what you are doing. Do not present it as just a series of equations and  numbers.  Label each step. Ex: “Step 1: Set-up the Total Revenue Equation”, “Step 4: Solve for the NPV”.  Box the final answers.  Use clear formatting: Indent at each step. Show your answers in just 1 column. (The problem set  will be read from top to bottom, and not top bottom diagonal right bottom.) Problem 1:  a) What is the problem with the co-terminated assumption?  b) Give 2 examples where the co-terminated assumption may be used. 
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Unformatted text preview: Problem 2: (This is the same problem on PS 11) A consulting firm proposed three possible improvements on a dilapidated service facility. The alternatives given ranged from band-aid to long-term solutions wherein the details are summarized in the tables below: A B C Capital Investment 30,000 20,000 50,000 Useful Life 2 3 5 Annual Expenses 1,000 4,000 2,500 Market Value 2,500 10,000 a) Which deal proposal would minimize long term expenses? b) How much discount (to the capital investment cost) should be applied to the “losing” alternatives so that it would be equally attractive with the best alternative? (Use the co-terminated assumption)....
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  • Spring '11
  • J3Patino
  • Capital Investment, long term expenses, capital investment cost, total revenue equation, dilapidated service facility.

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