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Ashley Foods, Inc. has determined that any one of five machines can be used in one phase of its chili canning operation. The costs of
Ashley Foods, Inc. has determined that any one of five machines can be used in one phase of its chili canning operation. The costs of the machines are estimated below, and all machines are estimated to have a 4-year useful life. If the minimum attractive rate of return is 20% per year, determine which machine should be selected on the basis of rate of return analysis.
Machine | First Cost $ | Annual Operating Cost, $ per year |
1 | -31,000 | -16,000 |
2 | -29,000 | -19,300 |
3 | -34,500 | -17,000 |
4 | -49,000 | -12,200 |
5 | -41,000 | -15,500 |
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