Question

A company is trying to decide between two machines that are necessary in its manufacturing facility. If management has minimum attractive rate of return (MARR) of 15%, which of the following machine should be chosen? Use annual cash flow analysis method

Machine A | Machine B | |

First cost | $45,000 | $24,000 |

Annual Cost | $31,000 | $35,000 |

Overhaul in Year 4 | $3,000 | $5,000 |

Salvage Value | 0 | 0 |

Useful Life | 8 years | 6 years |

Answer #1

The manager in a canned food processing plant is trying to
decide between two labeling machines.
Assume an interest rate of 6%. Use annual cash flow
analysis to determine which machine should be chosen
Machine A
Machine B
First cost
$15,000
$25,000
Maintenance and operating costs
1,600
400
Annual benefit
8,000
13,000
Salvage value
3,000
6,000
Useful life, in years
6
10

5.30 A company needs to purchase a new machine to maintain its
level of production. The company is considering three different
machines. The costs, savings and service life related to each
machine are listed in the table below.
Machine A
Machine B
Machine C
First Cost
$37,500
$31,000
$35,000
Annual Savings
$13,500
$12,000
$12,750
Annual Maintenance
$3,000 the first year
and increasing by
$600 every year
thereafter
$2,500
$2,000
Salvage Value
$5,000
$11,000
$13,000
Service Life
6 years
3 years...

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1. Wickland Company installs a manufacturing machine in its
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