A 50 horsepower motor is required to power a large capacity blower. Two motors A and B,

Question:

A 50 horsepower motor is required to power a large capacity blower. Two motors A and B, mutually exclusive, have been proposed. Their cost data are given in the next page:

The MARR is 5% per year. (6.5)
a. Determine which motor should be selected if the repeatability assumption applies.
b. Determine which alternative should be selected if the analysis period is 15 years, the repeatability assumption does not apply and the machines can be leased for $12,000 per year after the useful life of either machine is over.

MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...