You are selecting equipment for a project. There are two machines under consideration. They will provide the same function, but there are difference in cost, benefits, life and other details. Costs, Machine expense AND salvage prices all change with the RATE OF INFLATION. The costs and benefits in year 1 are given below. Benefits go up at a different rate than inflation. The value is given. Salvage costs are given for an 8 yr old machne A or a 4 yr old machine B in today's dollars. Adjust for inflation. Help your employer to determine which machine is the best choice. MARR 14.00%

Inflation 3.500%

Machine A Machine B

Initial Cost $9,500 Initial Cost $5,800

Salvage $4,000 8 yr old today Salvage $1,120 4 yr old machine today

Life 8 Years Life 4 Years

Benefits $ 5,100 Per year Benefits $4,800 Per year

Benefit inc 4.10% Benefits inc 3.90%

Costs $2,275 Per year Costs $2,300 Per year

Create the net cash flow chart for both machines.

Deterine the NPW for both machines.

Determine the EUAW for both machines.

Determine the NFW for both machines.

Determine the IRR for both machines

Detemine the DELTA IRR .

Which machine will you select? Why?

Graph the NPW versus MARR chart for both machines (both curves on the same graph)