The following costs are associated with three tomato-peeling machines being cons

Question

The following costs are associated with three tomato-peeling machines being considered for the use in a canning plant If the canning company uses an interest rate of 12%., which is the best alternative? Use NPW to make your decision. (Note: Consider the least common multiple as the study period.) Machine Economy Regular Deluxe First cost $75,000 $125,000 $220,000 Maintenance costs $8,000 $13,000 $38,000 Annual benefit $28,000 $43,000 $79,000 Salvage value $3,000 $6,900 $16,000 Useful life is ten years. use incremental rate of return anlysis, which alternative should the company choose? Use a MARR of 15%

Explanation / Answer

To apply rate of return analysis correctly, we need to classify an investment into either a simple or a nonsimple investment. using MARR of 15% company will go with Machine Economy Regular Deluxe First cost of $220,000 Maintenance costs approx $16,000 and Annual benefit of $43,000 with slavage of worth $3000 as laternative

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