Question
you are running a small machine shop where you need to replace a worn-out drilling machine. Two different models have been proposed: a. Model A
you are running a small machine shop where you need to replace a worn-out drilling machine. Two different models have been proposed:
a. Model A is semi-automated with a two-year life, requires an initial investment of $145,000, and has an annual operation cost of $54,000 for each of the two years, at which time it will have to be replaced. The expected salvage value of the machine is just $18,000.
b. Model B is an automated machine with a three-year life and requires an initial investment of $175,000 with an estimated salvage value of $21,000. The expected annual operating and maintenance cost of the Model B machine is $35,000.
Please Rush
Suppose that the current mode of operation is expected to continue for an indefinite period. You also think that these two models will be available in the future without significant changes in price and operating cost. At MARR = 13%, what is the difference in annual equivalent cost between the two models?
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