Scribd
Upload
33 views1 page

Item

The document compares two options for a purchase over 13 and 9 year periods. Option 1 costs £105,000 with £15,000 installation and annual costs of £48,000, needing repair every 4 years costing £9,500. Option 2 costs £135,000 to purchase with the same installation, annual costs of £42,000, repair every 3 years for £8,300 and resale value of £40,000. The cost of borrowing is 9% annually.

Uploaded by

Abdulateaf Satti
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
33 views1 page

Item

The document compares two options for a purchase over 13 and 9 year periods. Option 1 costs £105,000 with £15,000 installation and annual costs of £48,000, needing repair every 4 years costing £9,500. Option 2 costs £135,000 to purchase with the same installation, annual costs of £42,000, repair every 3 years for £8,300 and resale value of £40,000. The cost of borrowing is 9% annually.

Uploaded by

Abdulateaf Satti
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 1

Item Option 1 Option 2

Life expectancy 13 years 9 years


Purchase costs (£105,000) (£135,000)
Installation costs (£15,000) (£15,000)
Annual maintenance and (£48,000) (£42,000)
operating costs
Non-annual repair frequency 4 years 3 years
Non annual repair cost (£9500) (£8,300)
Resale Value £25,000 £40,000

If the cost of borrowing money is 9% pa, respectively.


a) Draw the cash flow diagrams of the two options.
b) Conduct the necessary WLC calculations and state which option you would recommend
and why.

You might also like