Giant Equipment Ltd. Is considering two projects to invest next year. Both projects have the same start-up costs. Project A will
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Solution:
Given :
Location game with 9 possible and other than the players who are moving simultaneously and also independently, but they move in a sequential manner.
Vendor 1 selects a location.
After observing decision of vendor 1, vendor 2 chooses where to locate.
Using backward induction the game is solved as below :
-- will be a Nash equilibrium.
-- Presently (vendor 1) picks first then he will likewise get the chance to pick last as this another move amusement.
-- In the end of the game, vendor 1 will have claimed five regions and candidate 2 (vendor 2) will have claimed four regions.
-- So vendor 2 will keep this in mind and apply backward induction and choose the best regions early on the game.
-- Vendor 2 will keep in mind that vendor 1 will choose last and will ensure that his choices take up the best locations first.
--- This will be his ideal technique for each activity of vendor 1.
Hence this is the Nash equilibrium.
Answer:
M1 EAC = 38,576.91
M2 EAC = 29,784.89
Explanation:
The equivalent annual cost is the PMT of the present worh of the machine/investment.
<em>Machine A</em>
54,000 at year 0 then 54,000 at beginning of year 4th
and 18,000 per year
We need to bering into present the 54,000 of the fourth year
the 18,000 are already split into each year.
Maturity 54,000
time 3 (it is done at the beginning of the 4th year not at the end of it)
rate 0.07
PV 44,080.09
54,000 + 44,080.09 = 98,080.09
Then we calculate the PMT
PV $98,080.09
time 6 years
rate 0.07
C $ 20,576.791
Now we add the annual cost of 18,000
getting 38,576.79 as annual equivalent cost ofr machine 1
<u>For machine B</u>
anual cost of 13,000
purchase of 92,000
and 18,000 salvage value at end of year 6:
Maturity 18,000.00
time 6.00
rate 0.07
PV 11,994.16
This is positive as is a cash inflow.
net worth: 92,000 - 11,994.16
net worth: 80.005,84
Now, we solve for PMT:
C $ 16,784.889
add the yearly maintenance cost of 13,000
Equivalent Annual Cost: 29,784.89