Given the net cash flow for two machines as shown below, what is the benefit cost...

Given the net cash flow for two machines as shown below, what is the benefit cost ratio for the difference in the benefits and costs for the higher initial cost machine and the lower initial cost machine if the MARR is 12%?

	Machine A		Machine B
Years	CF Costs	CF Benefits	CF Costs	CF Benefits
0	($67,000)	$0	($121,000)	$0
1	($17,600)	$65,000	($15,200)	$48,600
2	($72,458)	$65,000	($15,656)	$48,600
3	($18,672)	$65,000	($16,126)	$48,600
4	($76,871)	$65,000	($16,609)	$48,600
5	($19,809)	$65,000	($17,108)	$48,600
6	($1,551)	$65,000	$4,159	$48,600

		1.78
		1.56
		1.34
		1.14

Expert Solution


Years	Machine A		Machine B
	Costs	Benefits	Costs	Benefits	Cost Differences	Benefit Differences	Discount Factor @ 12%	Present Value of cost differences	Present Value of benefit differences
A	B	C	D	E	F = B-D	G = C-E	H	F*H	G*H
0	-67000	0	-121000	0	-54000	0	1	-54000	0
1	-17600	65000	-152000	48600	-134400	-16400	0.893	-120000	-14642.8571
2	-72458	65000	-15656	48600	56802	-16400	0.797	45282.2066	-13073.9796
3	-18672	65000	-16126	48600	2546	-16400	0.712	1812.19251	-11673.1961
4	-76871	65000	-16609	48600	60262	-16400	0.636	38297.5904	-10422.4965
5	-19809	65000	-17108	48600	2701	-16400	0.567	1532.61994	-9305.80043
6	-1551	65000	-4159	48600	-2608	-16400	0.507	-1321.29396	-8308.75039
								-88396.6844	-67427.0801

	Ratio :
		=88396.6844 /67427.08

		=1.34

jeff jeffy answered 7 months ago

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