Buy a pump with 10,000, Salvage with 4,000 after 10 years. Yearly maintenance is 500 and...
Buy a pump with 10,000, Salvage with 4,000 after 10 years. Yearly maintenance is 500 and benefit 800. At int rate =8%, which the correct formula? Put A, B, C, D
A. NPW (Machine X) = 10,000 - 800 (P/A, 8%, 10) - 500 (P/A, 8%, 10) + 4,000 (P/F, 8%, 10)
B. NPW (Machine X) = 800 (P/A, 8%, 10) - 500 (P/A, 8%, 10) + 4,000 (F/P, 8%, 10) - 10,000
C. NPW (Machine X) = 300 (P/A, 8%, 10) + 4,000 (P/F 8%, 10) - 10,000
D. NPW (Machine X) =10,000 + 800 (P/A, 8%, 10) - 500 (P/A, 8%, 10) + 4,000 (P/F, 8%, 10)
Homework Answers
Answer: C
For a NPW of Machine
NPW = - Intial investment + ( Benefit - maintenance) (P/A,I,n) + Salvage value (P/F,I,n)
NPW =-10000 + (800-500) (P/A,8%,10)+4000(P/F,8%,10)
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