Question
A small manufacturing firm is considering purchasing a new boring machine to modernize one of its production lines. Two types of boring machine are available
A small manufacturing firm is considering purchasing a new boring machine to modernize one of its production lines. Two types of boring machine are available on the market. The machines are described by the following characteristics:
Item | Machine A | Machine B |
First cost | $7,234 | $8,805 |
Service life | 8 years | 10 years |
Salvage value | $569 | $1,026 |
Annual O&M costs | $729 | $606 |
CCA rate | 30% | 30% |
Determine the break-even annual O&M costs for machine A so that the present worth of machine A is the same as that of machine B. Use a MARR (after tax) of 10% and a marginal tax rate of 30%.
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