Question

For the below ME alternatives , which machine should be selected based on the AW analysis. MARR=10%

	Machine A	Machine B	Machine C
First cost, $	21,302	30000	10000
Annual cost, $/year	9,993	6,000	4,000
Salvage value, $	4,000	5,000	1,000
Life, years	3	6	2

Answer the below questions :

A- AW for machine A=

For the below ME alternatives , which machine should be selected based on the AW analysis. MARR=10%

	Machine A	Machine B	Machine C
First cost, $	15000	26,087	10000
Annual cost, $/year	9,164	6,000	4,000
Salvage value, $	4,000	5,000	1,000
Life, years	3	6	2

Answer the below questions :

B- AW for machine B=

For the below ME alternatives , which machine should be selected based on the AW analysis. MARR=10%.

	Machine A	Machine B	Machine C
First cost, $	15000	30000	13,830
Annual cost, $/year	18,135	6,000	4,000
Salvage value, $	4,000	5,000	1,000
Life, years	3	6	2

Answer the below questions :

C- AW for machine C =

D- Based on the AW value you got in the previous 3 questions, which machine we should select? type you explanation below

Answer 1

A.

Machine A

Annual worth = 21302(A/P,10,3) + 9993 – 4000(A/F,10,3)

Using DCIF Tables

Annual worth = 21302(0.4021) + 9993 – 4000(0.3021)

Annual worth = $17350.13B.

Machine B

Annual worth = 26087(A/P,10,6) + 6000 – 5000(A/F,10,6)

Using DCIF Tables

Annual worth = 26087(0.2296) + 6000 – 5000(0.1296)

Annual worth = $11341.6

C.

Machine C

Annual worth = 13830(A/P,10,2) + 4000 – 1000(A/F,10,2)

Using DCIF Tables

Annual worth = 13830(0.5762) + 4000 – 1000(0.4762)

Annual worth = $11492.7

D.Based on AW worth Machine B is to be selected as it has minimum Annual worth