Question
You have an option for two different machines on your new project. Each machine will provide the same function, but there are differences in cost,
You have an option for two different machines on your new project. Each machine will provide the same function, but there are differences in cost, benefits, life and other details. Expenses, 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 and are different for each machine. Salvage costs are given for an 16 yr old machne A or a 8 yr old machine B TODAY. Adjust with inflation. Help your employer to determine which machine is the best choice. MARR 14.20% Inflation 2.750% Machine A Machine B Initial Cost $14,200 Initial Cost $ 10,300 Salvage $ 5,900 16 yr old machine today Salvage $ 3,100 8 yr old machine today Life 16 Years Life 8 Years Benefits $ 8,100 Per year Benefits $ 6,900 Per year Benefit inc 3.90% Benefits inc 4.50% Costs $ 3,250 Per year Costs $ 2,975 Per year 5a. Create the net cash flow chart for both machines. 5b. Deterine the NPW for both machines. 5c. Determine the EUAW for both machines. 5d. Determine the NFW for both machines. 5e. Determine the IRR for both machines 5f. Detemine the DELTA IRR . 5g. Which machine will you select? Show the decision table for these alternatives. 5h. Graph the NPW versus MARR chart for both machines (both curves on the same graph
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