Four different machines were under consideration for materials flow improvement on a drug bottling line. An engineer performed the economic analysis to select the best machine, but some of his calculations were removed from the report by a disgruntled employee. All machines are assumed to have a 10-year life.

(a) Fill in the missing values in the comparison table.

(b) Select the best machine at MARR = 18% per year, provided one must be chosen.

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Machine 2 3 4 Initial cost, $ -60,000 -72,000 -98,000 Annual cost, $ per year Annual savings, $ -70,000 -64,000 -61,000 -58,000 +80,000 +80,000 +80,000 +82,000 per year 23.1% 18.6% Overall ROR, i*, % 20.8% 2 vs. 1 Machines compared 3 vs. 2 4 vs. 3 Incremental investment, $ - 16,000 -26,000 Incremental cash flow, $ per year +6,000 +3,000 ROR on increment, 35.7% Ai*, %