Old Southwest Canning Co. has determined that any one of four machines can be used in a certain phase of its chili-canning operation. The first costs and annual operating costs (AOC) are estimated below, and all machines have a 5-year life. The MARR is 25% per year.

(a) Determine which machine should be selected on the basis of a rate of return analysis.

(b) Use a spreadsheet to perform PW analysis of each machine. Compare the machine selections with that of the ROR analysis.

Machine First Cost, $ AOC, $
1 28,000 20,000 2 51,000 12,000 3 32,000 19,000 4 33,000 18,000