Please answer all questons QUESTION 5 Based on the table, what is the incrementa

Question

Please answer all questons

QUESTION 5 Based on the table, what is the incremental initial cost in moving from Investment A to Investment B when 15%? Purchase price Annual maintenance Salvage Useful life (vears a. $172 Investment A Investment B 12,000 900 2,500 $9,000 300 $1,200 O b. S600 O c. $1300 O d. $3000 QUESTION 6 Based on the table, what is the incremental EUAC in moving from Investment A to Investment B when 15%? Purchase price Annual maintenance Salvage Useful life (years a. Reduced EUAC of $111 Investment A Investment B 12,000 $900 2,500 $9,000 300 $1,200 o b. Additional EUAC of $111 c. Additional EUAC of $600 O d. Reduced EUAC of $600

Explanation / Answer

(Question 5) Option (d)

Incremental initial cost = $12,000 - $9,000 = $3,000

(Question 6) Option (a)

EUAC, Investment A ($) = 9,000 x A/P(15%, 3) + 300 - 1,200 x P/F(15%, 3) x A/P(15%, 3)

= 9,000 x 0.438** + 300 - 1,200 x 0.6575** x 0.438**

= 3,942 + 300 - 346

= 3,896

EUAC, Investment B ($) = 12,000 x A/P(15%, 6) + 900 - 2,500 x P/F(15%, 6) x A/P(15%, 6)

= 12,000 x 0.2642** + 900 - 2,500 x 0.4323** x 0.2642**

= 3,170 + 900 - 286

= 3,784

Incremental EUAC = $3,784 - $3,896 = -$112# (Reduction in EUAC)

**From A/P and P/F factor tables

#Slight difference due to rounding off

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