Question
Machine A has an initial cost of $100,000 and a useful lifespan of 12 years. It will save $30,000 per year during the first 3
Machine A has an initial cost of $100,000 and a useful lifespan of 12 years. It will save $30,000 per year during the first 3 years and then $15,000 per year until the end of its useful life. It will have a salvage value of $15,000 at that point. Machine B has an initial cost of $125,000 and a useful lifespan of 12 years. It will save $25,000 per year during the first 5 years and then $30,000 per until the end of its useful life. It will have no salvage value. Assume a MARR of 10%.
What is the payback period of machine A? 3.67
What is the payback period of machine B? 5
Based on payback analysis, which machine would be a better investment? A
What is the rate of return for machine A? 18.65
What is the rate of return for machine B? 17.89
What is the incremental rate of return for the two machines?
Based on rate of return analysis, which machine would be the better investment?
I just need help finding the IRR and which machine to choose based off of that, but included the other values to help, thanks so much!!
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