Q5-) A regional infrastructure building and maintenance contractor must decide to buy a new compact horizontal directional drilling (HDD) machine now, or wait and buy it 2 years from now when a large pipeline contract will require the new equipment. The HDD machine will include an innovative pipe loader design and a maneuverable undercarriage system. The cost of the system is $68,000 if purchased now or an estimated $81,000 if purchased 2 years from now. At /= 10% per year and f = 5% per year, determine if the contractor should buy now or later (a) without any adjustment for inflation, and (b) with inflation considered.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Q5-) A regional infrastructure building and maintenance contractor must decide to buy a new compact horizontal
directional drilling (HDD) machine now, or wait and buy it 2 years from now when a large pipeline contract will
require the new equipment. The HDD machine will include an innovative pipe loader design and a maneuverable
undercarriage system. The cost of the system is $68,000 if purchased now or an estimated $81,000 if purchased
2 years from now. At i = 10% per year and f= 5% per year, determine if the contractor should buy now or later
(a) without any adjustment for inflation, and (b) with inflation considered.
Transcribed Image Text:Q5-) A regional infrastructure building and maintenance contractor must decide to buy a new compact horizontal directional drilling (HDD) machine now, or wait and buy it 2 years from now when a large pipeline contract will require the new equipment. The HDD machine will include an innovative pipe loader design and a maneuverable undercarriage system. The cost of the system is $68,000 if purchased now or an estimated $81,000 if purchased 2 years from now. At i = 10% per year and f= 5% per year, determine if the contractor should buy now or later (a) without any adjustment for inflation, and (b) with inflation considered.
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