As proprietor of your own business, you are considering the option of purchasing a new high-efficiency machine
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As proprietor of your own business, you are considering the option of purchasing a new high-efficiency machine to replace older machines currently in use. You believe that the new technology can be used to replace four of the older machines, each with a current market value of $600. The new machine will cost $5000 and will save the equivalent of 10,000 kW-hr of electricity per year over the older machines. After a period of 10 years neither option (new or old) will have any market value. If you use a before tax MARR of 25% and pay $0.075 per kilowatt-hour, would you replace the old machines today with the new one?
MARRMinimum 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...
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