Alternative A is spending $125,000 on repairing the current machine the company owns. This would extend the life of the old machine for another 10 years and will yield savings of $19,000 per year. The salvage value of the repaired machine is going to be $29,000 at the end of year ten. Alternative B is buying a new machine at a cost of $200,000 today which will last also for 10 years. Purchasing Alternative B, will save you $31.000 per year and there will be a salvage value of $31.000 at the end of its useful life. Find the best alternative using 'incremental benefit-cost ratio analysis of the rate is 10 percent.

Answer rating: 100% (QA)

For Alternative A Incremental Benefit can be computed as Annual savings Salv... View the full answer