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Old Southwest Canning Co. has determined that any one of four machines can be used in...

Old Southwest Canning Co. has determined that any one of four machines can be used in its chili-canning operation. The cost of the machines are estimated below, and all machines have a 5-year life. If the minimum attractive rate of return is 25% per year, determine which machine should be selected on the basis of a rate of return analysis.

Machine First Cost, $ AOC, $
1 −28,000 −20,000
2 −51,000 −12,000
3 −32,000 −19,000
4 −33,000 −18,000

Machine 4, 2, 1, or 3  should be selected.

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