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In: Economics

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 2 years ago
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