Question

Your company is considering replacing it primary machine press. Given the following information, how many years...

Your company is considering replacing it primary machine press. Given the following information, how many years must the new machine be operational to justify replacing the old press. Provide your answer to the tenth of a year e.g. 1.5 years.

New Machine Cost: $120,000
Savings per year: $2,000
MARR: 10%
Lifetime (years) 20
Resale value 0

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Answer #1

Since IRR is less than MARR replacing the old press will never be justified as it will take more than 20 years to justify the new press but life is also 20 years

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Initial Investment 120000
Savings per year 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000
Cash Flow -120000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000
IRR -8.76%
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