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(Solved): PROBLEM 5 A construction company is planning to complete a soil compaction process within 10 years. ...
PROBLEM 5
A construction company is planning to complete a soil compaction process within 10 years.
Only one machine will work during this period. The company decides on purchasing a new
machine costing 500.000 $ and having a useful life of 6 years. Maintenance and operating
costs are 50.000($)/(y)r with an increasing rate of 10.000($)/(y)r. This machine will provide an
annual income of 100.000$ during its lifetime and a salvage value of 250.000$ at the end of 6
years. At that time another machine is planned to be bought at a cost of 750.000$ having a
life time of 4 years and a salvage value of 450.000$. Maintenance and operation cost is
estimated to be 100.000$ at the end of the 2nd year of its useful life. Annual incomes are
150.000($)/(y)r with an increasing rate of 50.000($)/(y)r till the end of its lifetime. Considering that
the interest rate is 7% for the first 6 years and 9% for the next 4 years, find the present worth
of these investments.