Any one of five machines can be used in a certain phase of a canning operation.

Question

Any one of five machines can be used in a certain phase of a canning operation. The costs of the machines are shown below and all are expected to have a 10-year life. If the company’s minimum attractive rate of return is 16% per year, determine which machine should be selected on the basis of rate of return.

1

2

3

4

5

First Cost

28,000

33,000

32,000

51,000

46,000

Annual Cost

20,000

18,000

19,000

13,000

14,000

1

2

3

4

5

First Cost

28,000

33,000

32,000

51,000

46,000

Annual Cost

20,000

18,000

19,000

13,000

14,000

Explanation / Answer

Any one of five machines can be used in a certain phase of a canning operation.

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