Two alternative machines will produce the same product, but one is capable of hi

Question

Two alternative machines will produce the same product, but one is capable of higher-quality work, which can be expected to return greater revenue. The following are relevant data. Determine which is the better alternative, assuming repeatability and using SL depreciation, an income-tax rate of 37%, and an after-tax MARR of 8% Capital investment Life Terminal BV (and MV) Annual receipts Annual expenses Machine A $16,000 12 years $3,500 $147,000 $144,000 Machine B $34,000 years $500 $198,000 $168,000 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 8% per year. Calculate the AW value for the Machine A. AWA(896)= $ (Round to the nearest dollar.)

Explanation / Answer

Capital recovery = -Intial investment + salvage value (Both are converted to annual amounts)

AW = CR + Receipts - Expenses

AW = -16000*PMT(8%,12,-1) + 3500*PMT(8%,12,,-1) + 147000 - 144000

AW = -16000*0.13 + 3500*0.05 + 3000

AW = 1061.31 = 1061

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