Question
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,
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, benefits, machine prices AND salvage all go up at the rate of inflation. Costs and benefits are shown for year 1. Benefits go up by the % given. Salvage costs are given for an 10 yr old machne A or a 5 yr old machine B TODAY. Adjust with inflation. Help your employer to determine which machine is the best choice. MARR 13.80% Inflation 3.100% Machine A Machine B Initial Cost $10,400 Initial Cost 6,200 Salvage $ 4,100 10 yr old machine today Salvage 1,275 5 yr old machine today Life 10 Years Life 5 Years Benefits $ 6,100 Per year Benefits S 5,800 Per year Benefit inc 3.90% Benefits inc 3.50% Costs $ 2,482 Per year Costs 2,420 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 NEW 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)
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