Question

For the below ME alternatives , which machine should be selected based on the PW analysis. MARR=10%

	Machine A	Machine B	Machine C
First cost, $	23,979	30000	10000
Annual cost, $/year	8,679	6,000	4,000
Salvage value, $	4,000	5,000	1,000
Life, years	3	6	2

Answer the below questions :

A- PW for machine A=

Answer 1

Since the life of the alternatives are unequal, we have to take the LCM of 3, 6, and 2. The LCM is 6. We have to calculare present worth of the alternatives taking life of the project as 6 years.

PW for machine A = -23,979 - (23979 - 4,000) (P/F, 10%, 3) - 8,679(P/A, 10%, 6) + 4,000(P/F, 10%, 6)

                             = -23,979 - 19979(0.7513) - 8,679(4.355) + 4,000(0.5645)

                             = -23,979 - 15,010.22 37,797.04 + 2,258

                             = -$75,528.26