Question: 5. There are two alternative machines for a manufacturing process. Both machines have the same output rate, but they differ in costs. Machine A costs
5. There are two alternative machines for a manufacturing process. Both machines have the same output rate, but they differ in costs. Machine A costs $2,000 to set up and $750 per year to operate. It must be completely replaced every 3 years, and it has no salvage value. Machine B costs $5,000 to set up 3 and $160 per year to operate. It should last for 5 years and has no salvage value. The costs of two machines are shown below. Based on the equivalent annual cost method, which machine do you recommend if the cost of capital is 10%? 0 1 2 3 4 5 Machine A 2,000 750 750 750 Machine B 5,000 160 160 160 160 160
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