A company needs to purchase a new machine to maintain its level of production. The company...

A company needs to purchase a new machine to maintain its level of production. The company is considering three different machines. The costs, savings and service life related to each machine are listed in the table below.

	Machine A	Machine B	Machine C
First cost	$37500	$31000	$35000
Annual Savings	$13500	$12000	$12750
Annual Maintenance	$3,000 the first year and increasing by $600 every year thereafter	2500	2000
salvage value	5000	11000	13000
Service life	6 years	3 years	3 years

Given a MARR of 12% and using the rate of return method, which alternative should be chosen?

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Expert Solution

Rahul Sunny answered 1 year ago

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