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An engineer uses a economic analysis to determine which of two different machines to purchase. The...

An engineer uses a economic analysis to determine which of two different machines to purchase. The machine is capable of performing the task. Assume the minimum attractive rate of return of 4% compounded semiannually. What is the annual worth of the machine?

Initial cost   = $11,000

Estimated life = 10 years

Salvage value = $3,500

Semiannual maintenance cost = $475

Semiannual income = 2,475

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Answer #1
Semi-Annual inflows 2475
Less: Operating cost 475
Net inflows 2000
Annuity factor (i=2% n=20) 16.351
Present value of Inflows 32702
Aadd: Present value off salvage 2355.5
($ 3500*0.673)
Total Present value of inflows 35057.5
Less: Initial Investment 11000
Present worth 24057.5
Divide: Annuity factor 16.351
Annualised Equivalent cash flows 1471.317
Present worth of project: 24058
Annualised Equivalent flows: 1471
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