A construction company has two alternatives to purchase an excavator machine which is to be employed at a construction s

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A Construction Company Has Two Alternatives To Purchase An Excavator Machine Which Is To Be Employed At A Construction S 1 (52.96 KiB) Viewed 13 times

A construction company has two alternatives to purchase an excavator machine which is to be employed at a construction site for moving soil. The cash flow details of the twe alternatives are presented in the table below. The company's minimum attractive rate of return (MABR) is 10% per year. (8) Determine the breakeven based on operating hours per year and draw the breakeven (b) if the company is expected to use the machine for 950 hours per year, which alternative should they select and why? Alternative-1 Alternative-2 Initial Purchase Cost $4,865,000 $5,350,000 Operating Cost for Moving Soil $11/m³ of Soil $0.80/m³ of Soil Capacity of the Machine 52 m³ per hour 60 m³ per hour Salvage Value $1,250,000 $1,410,000 12 years Useful Life 12 years Free Work Area (No Marks Given)