National homebuilders Inc plans to purchase new rain gutter forming equipment. Twomanufacturers offered the following estimates,First Cost, $Annual OperatingCost, $/yearSalvage Value, $Life, yearsVendor A15,000350010006Vendor B18,000310020009a. Determine which vendor should be selected on the basis of a PW comparison, if theMARR is 15% per year.b. National Homebuilders has a standard practice of evaluating all options over a 5-yearperiod. If a study period of 5 years is used and the salvage values are not expected tochange, which vendor should be selected?

The term "MARR" stands for "Minimum Acceptable Rate of Return." It is also commonly referred to as…

National homebuilders Inc plans to purchase new rain gutter forming equipment. Two manufacturers offered the following estimates, First Cost, $ Annual Operating Cost, $/year Salvage Value, $ Life, years Vendor A 15,000 3500 1000 6 Vendor B 18,000 3100 2000 9

National homebuilders Inc plans to purchase new rain gutter forming equipment. Two manufacturers offered the following estimates, First Cost, $ Annual Operating Cost, $/year Salvage Value, $ Life, years Vendor A 15,000 3500 1000 6 Vendor B 18,000 3100 2000 9

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

National homebuilders Inc plans to purchase new rain gutter forming equipment. Two
manufacturers offered the following estimates,
First Cost, $
Annual Operating
Cost, $/year
Salvage Value, $
Life, years
Vendor A
15,000
3500
1000
6
Vendor B
18,000
3100
2000
9
a. Determine which vendor should be selected on the basis of a PW comparison, if the
MARR is 15% per year.
b. National Homebuilders has a standard practice of evaluating all options over a 5-year
period. If a study period of 5 years is used and the salvage values are not expected to
change, which vendor should be selected?

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