Question

or th below two machines and based on CC analysis which machine we should select? MARR=10%.

	Machine A	Machine B
First cost, $	24,311	100,000
Annual cost, $/year	13,553	7,000
Salvage value, $	6,323	-
Life, years	3	infinite

Answer the below question:

A- the CC for machine A= 

Answer 1

SOLUTION :

r = MARR = 10% = 0.1

=> (1 + r) = 1.1

PV of costs of Machine A :

= 24311 + 13353/ 1.1 + 13353/1.1^2 + 13353/1.1^3 - 6323/1.1^3 

= 52767.37 ($) 

PV of costs of Machine B :

= 100000 + 7/0.1

= 100070 ($) 

Therefore, as per CC, Machine A has lower cost. So Machine A should be selected.

(ANSWER)