Table below shows the cash flow data of TWO MEAs under consideration. If the minimum required interest rate is 12% per year, determine which alternative (X or Y) should be selected by performing the following equivalent-worth analyses respectively:
|
|
Machine X
|
Machine Y
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|
Investment cost ($)
|
400000
|
500000
|
|
Annual operating cost ($)
|
50000
|
40000
|
|
Annual operating revenue ($)
|
270000
|
240000
|
|
Salvage value ($)
|
65000
|
95000
|
|
Useful life (years)
|
2
|
3
|
(a) Future-worth (FW) analysis with co-terminated assumption applied for a study period of three years.
(b) Present-worth (PW) analysis with repeatability assumption applied for a study period of six years.
(c) Annual-worth (AW) analysis with repeatability assumption applied.
(d) Under repeatability assumption, perform an AW analysis on Machine X with a study period of six years. Does it make any difference to the AW result for Machine X in part (b)(iii) above?