Question
In: Finance
"A company is considering two types of machines for a manufacturing process. Machine A has an...
"A company is considering two types of machines for a
manufacturing process. Machine A has an immediate cost of $75,000,
and its salvage value at the end of 6 years of service life is
$21,000. The operating costs of this machine are estimated to be
$3600 per year. Extra income taxes are estimated at $2300 per
year.
Machine B has an immediate cost of $43,000, and its salvage value
at the end of 6 years' service is negligible. The annual operating
costs for Machine B will be $10,000. There are no extra income
taxes with Machine B.
Compare these two mutually exclusive alternatives by the
present-worth method at i = 12.2%. Enter the ""net present cost""
as a positive number for the machine that you would select. You
must select one of the two machines."
Solutions
Expert Solution
Present worth of machine A is calculated in excela nd screen shot provided below:
Present worth of machine A is -$88,594.55.
Again,
Present worth of machine B is calculated in excela nd screen shot provided below:
Present worth of machine B is -$83,882.24.
Since, Present worth of machine B is higher than present worth of machine A, so comapny should choose machine B.
jeff jeffy answered 1 year agoRelated Solutions
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