Should the construction company purchase this equipment

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Reference no: EM131327316

A construction company is deciding if they want to purchase some new road improvement equipment The equipment has a first cost of $70,000, it will have annual benefits to the general public of $17,000 per year, and the equipment will be sold for $12,000 at the end of its useful life. The useful life is 10 years, and the MARR is 7%. a). Determine the B/C ratio. Should the construction company purchase this equipment? b). It is then found that a student working with the construction company came across some alternative equipment that has a first cost of $100,000, and this will result in a savings to the general public of $21,000 per year, and the equipment will be sold for $17,000 at the end of the of its useful life of 11 years. Using incremental B/C analysis procedure, and the results from (a), determine if the construction company should invest in the more expensive equipment at MARR of 7%. c). For the data in the parts a and b, use IRR procedure to determine which construction equipment should be chosen. Assume MARR is 7% (you can use excel for this). d). For the data in parts a and b, construct a choice table for values I from 0% to 100% and graph the results. Based on these results, and MARR of 7%, which equipment should be chosen?

Reference no: EM131327316

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