Ch.

5 - Study Period - Example

▪ Two Machines Alternatives, A and B where one
can buy one of two machines
Machine A Machine B
First cost, $ -15,000 -18,000
Annual lease cost,
$ per year -3,500 -3,100
Salvage,$ 1,000 2,000
Life, years 6 9

▪ Which option is preferred if the interest rate is

15% per year based on a study period of 8
years? The company is using a SL depreciation.

Chapter 5 - 1 UOB, Mechanical Engineering Department, Dr Osama Al-Jamal, ©2015

In case of LCM
The Cash Flow Diagrams are:

Chapter 5 - 2 UOB, Mechanical Engineering Department, Dr Osama Al-Jamal, ©2015

1
 Study Period Example Present Worth's

Chapter 5 - 3 UOB, Mechanical Engineering Department, Dr Osama Al-Jamal, ©2015

Study Period Example Present Worth's

Chapter 5 - 4 UOB, Mechanical Engineering Department, Dr Osama Al-Jamal, ©2015