Appledale Dairy is considering upgrading an old ice-cream maker. Upgrading is available at two levels: moderate and extensive. Moderate upgrading costs $6,900 now and yields annual savings of $3,600 in the first year, $3,250 in the second year, $2,900 in the third year, and so on. Extensive upgrading costs $10,550 and saves $7,700 in the first year. The savings then decrease by 20 percent each year thereafter. If the upgraded ice-cream maker will last for seven years, which upgrading option is better? Use a present worth comparison. Appledale's MARR is 5 percent. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 5%. The present worth of the moderate upgrading option is $ and the present worth of the extensive upgrading option is $ The V upgrading option is better. (Round to the nearest cent as needed.)

Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.6P
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Appledale Dairy is considering upgrading an old ice-cream maker. Upgrading is available at two levels: moderate and extensive. Moderate upgrading costs $6,900
now and yields annual savings of $3,600 in the first year, $3,250 in the second year, $2,900 in the third year, and so on. Extensive upgrading costs $10,550 and saves
$7,700 in the first year. The savings then decrease by 20 percent each year thereafter. If the upgraded ice-cream maker will last for seven years, which upgrading
option is better? Use a present worth comparison. Appledale's MARR is 5 percent.
Click the icon to view the table of compound interest factors for discrete compounding periods when i = 5%.
The present worth of the moderate upgrading option is $
and the present worth of the extensive upgrading option is $
The
V upgrading option is
better.
(Round to the nearest cent as needed.)
Transcribed Image Text:Appledale Dairy is considering upgrading an old ice-cream maker. Upgrading is available at two levels: moderate and extensive. Moderate upgrading costs $6,900 now and yields annual savings of $3,600 in the first year, $3,250 in the second year, $2,900 in the third year, and so on. Extensive upgrading costs $10,550 and saves $7,700 in the first year. The savings then decrease by 20 percent each year thereafter. If the upgraded ice-cream maker will last for seven years, which upgrading option is better? Use a present worth comparison. Appledale's MARR is 5 percent. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 5%. The present worth of the moderate upgrading option is $ and the present worth of the extensive upgrading option is $ The V upgrading option is better. (Round to the nearest cent as needed.)
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