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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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