Question

In: Finance

"Your company needs a machine for the next 20 years. You are considering two different machines....

"Your company needs a machine for the next 20 years. You are considering two different machines.
Machine A
Installation cost ($): 2,500,000
Annual O&M costs ($): 77,000
Service life (years): 20
Salvage value ($): 79,000
Annual income taxes ($): 65,000
Machine B
Installation cost ($): 1,250,000
Annual O&M costs ($): 107,000
Service life (years): 10
Salvage value ($): 46,000
Annual income taxes ($): 45,000
If your company s MARR is 14%, determine which machine you should buy. Assume that machine B will be available in the future at the same costs. Enter the Annual Equivalent Cost as a positive number of the preferred machine."

Solutions

Expert Solution

Use the following inputs on the spreadsheet to calculate the EAC of the 2 machines:

The results obtained are as follows:

jeff jeffy answered 2 years ago
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