ExampleA company is considering two types of equipment for itsmanufacturing plant. Pertinent data are as follows:FreezeType AType BFirst costP200,000P300,000Annual Operating CostP32,000P24,000DAnnual Labor CostP50,000P32,000Insurance and Property Taxes 3%3%Payroll Taxes4%4%Estimated LifeTO10If the minimum required rate of return is 15%, which equipmentshould be selected?

An operating expense is a cost incurred by a company as a result of its regular operations.The…

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If the minimum required rate of return is 15%, which equipment should be selected?

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

Example
A company is considering two types of equipment for its
manufacturing plant. Pertinent data are as follows:
Freeze
Type A
Type B
First cost
P200,000
P300,000
Annual Operating Cost
P32,000
P24,000
D
Annual Labor Cost
P50,000
P32,000
Insurance and Property Taxes 3%
3%
Payroll Taxes
4%
4%
Estimated Life
TO
10
If the minimum required rate of return is 15%, which equipment
should be selected?

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