Question #268647

A purchasing agent plans to buy some new equipment for the mailroom. Two manufacturers have

provided bids. An analysis shows the following:

Manufacturer Cost Useful Life (years) End-of-Useful-Life

Salvage Value

Speedy $2500 7 $250

Allied 2600 7 425

The equipment of both manufacturers is expected to perform at the desired level of (fixed)output. For a

7-year analysis period, which manufacturer’s equipment should be selected? Assume 7% interest and

equal maintenance costs.

Expert's answer

Given:

cost of the asset three year before is =$100,000

Decrease in book value is=$25,00

Present market value is=$250

First cost for replacement =$75,000

solution:

Cost effective ratio(CER):The net value is split by the changes in health outcomes to urge a cost-effectiveness magnitude relation. value per illness avoided or value per mortality avoided area unit 2 examples. The results area unit provided as web value savings if cyber web prices area unit negative (meaning a more practical intervention is a smaller amount expensive).

Cost effective ratio can be calculated by using the following formula:

Cost effective ratio= *Cost* *per* *employee /Measurement* *score*

Sunk cost=

[cos*t*

*of* *the* *asses*−(*Decrea*sin*g* *book* *value*×*Number* *of* *year* *from* *the* *purchase*

*of* *assest* )−*Present* *market* *value*]

"=100,00\u2212(20,000\u00d73)\u221215,000"

"=100,000\u221260,000\u221215,000"

"=25,000"

Thus the sunk cost is25,000

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