A firm is considering purchase of a new machine to increase the output of an existing...

 

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A firm is considering purchase of a new machine to increase the output of an existing production process. If each of these two machines provides the same service over their useful lives and the MARR is 15%. Investment cost Net annual revenues Market value at end of useful life Useful life IRR Machine A Machine B $150,000 $75,000 $33,675 $22,879 $25,000 $10,000 10 years 19.1% 5 years 18.5% Which of the two machines, if any, do you recommend by using: 1. Repeatability assumption. 2. Coterminated assumption with a study period of 7 years. (9 points) (16 points) A firm is considering purchase of a new machine to increase the output of an existing production process. If each of these two machines provides the same service over their useful lives and the MARR is 15%. Investment cost Net annual revenues Market value at end of useful life Useful life IRR Machine A Machine B $150,000 $75,000 $33,675 $22,879 $25,000 $10,000 10 years 19.1% 5 years 18.5% Which of the two machines, if any, do you recommend by using: 1. Repeatability assumption. 2. Coterminated assumption with a study period of 7 years. (9 points) (16 points)

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To figure out which machine to suggest utilizing the repeatability presumption and the coterminated ... View the full answer