Question

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.

Answer 1

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=

[cost

 of the asses−(Decreasing book value×Number of year from the purchase

 of assest )−Present market value]

$=100,00−(20,000×3)−15,000$

$=100,000−60,000−15,000$

$=25,000$

Thus the sunk cost is25,000