) A company wants to purchase a new machine. There two options Machine A and Machine...

) A company wants to purchase a new machine. There two options Machine A and Machine B. The first costs of A and B are $9000 and $11,000 respectively. Machine A has net annual benefits of $1800 for the first year and will increase by $150 every year during its five year useful life, and the salvage value is $600. Machine B has net annual benefits of $3200 but will decrease by $150 every year during during each year of its four year useful life, and the salvage value is $1500. If the MARR is 12%, which machine should be selected?

Expert Solution

IF there is an option, reject both since both have negative equivalent annual benefit. However if one has to be selected, select B since it has a higher Equivalent benefit.

Year	A	B
0	-9000	-11000
1	1800	3200
2	1950	3050
3	2100	2900
4	2250	4250
5	3000

NPV	-1211.39	-946.30
EUAB	($336.05)	($311.55)

jeff jeffy answered 7 months ago

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