Tutorial 4

Tutorial 4 - Example 1 Two options have been proposed for...

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Example 1 Two  options  have  been  proposed  for  fitness  equipment  for  a  recreation centre: buying new (option A) or buying used (option B).  Data for the two proposals are shown below. The MARR is 10%. a) Using the repeated lives method, which option would you choose?  b) Assume  now  that  the  two  options  cannot  be  repeated,  so  a  study  period of 4 years will be used. What salvage value,  S , will be required  for  Option  A  to  make  the  PW  of  both  options  equal?  Under  what  conditions would you choose Option A? Option B? Option A - new Option B - used First cost $100,000 $70,000 Period before replacement 10 years 4 years Annual Maintenance $5,000 $3,400
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Example 2 and sell a technological upgrade for all its cars currently in service for the next  five  years.    Investment  in  production  equipment  and  training  would  cost 
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Tutorial 4 - Example 1 Two options have been proposed for...

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