Question

. The Deadeye Distillery is opening a new production facility at Sweetwater Springs. Two types of...

. The Deadeye Distillery is opening a new production facility at Sweetwater Springs. Two types of stills are being considered.

Alternative

Sourmasher

Cornsqueezer

1st Cost

$10,000

$15,000

Useful Life

4 yrs

6 yrs

Salvage Value

0

$2000

Maintenance

     1st Year

$800

$1000

     Increase for each additional year

$200

$ 400

If the stills are needed for 12 years, find the equivalent present value for each with an interest rate of 6%.

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Homework Answers

Answer #1
Data Sourmasher Cornsqueezer
Life Yrs 4 6
1st Cost $10000 $15000
Salvage Value $0 $2000
M&O Cost $800 $1000
M&O Gradient $200 $400

Sourmasher

Months 0 1 2 3 4 5 6 7 8 9 10 11 12
10000 10000 10000
Maintainence 800 1000 1200 1400 800 1000 1200 1400 800 1000 1200 1400
10000 800 1000 200 11400 800 1000 1200 11400 800 1000 1200 1400
19666.42

Cornsqueezer

Months 0 1 2 3 4 5 6 7 8 9 10 11 12
15000 15000
Maintainence 1000 1400 1800 2200 2600 3000 1000 1400 1800 2200 2600 3000
2000 2000
15000 1000 1400 1800 2200 2600 18000 1000 1400 1800 2200 2600 3000
25441.19

As you can see from above calculations that the the cost is less for Masher.

Please comment if any doubts.

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