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In: Economics

Machine X has a first cost of $70,000 and an operating cost of$21,000 in year...

Machine X has a first cost of $70,000 and an operating cost of $21,000 in year 1, increasing by $500 per year through year 5 with a salvage value of $13,000. Machine Y has a first cost of $62,000 and an operating cost of $21,000 in year 1, increasing by 3% per year through year 10 with a salvage value of $2000. If the interest rate is i =10% per year, evaluate which machine must you choose on the basis of:

(a) the present worth analysis,

(b) the conventional B/C analysis

Solutions

Expert Solution

a. PW OF COST IS LESSER FOR X, SO SELECT X

b. CONVENTIONAL B/C RATIO IS MORE FOR X, SO SELECT X


FORMULA:

Rahul Sunny answered 2 years ago
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