Question: A small manufacturing firm is considering purchasing a new boring machine to modernize one of its production lines. Two types of boring machine are available

A small manufacturing firm is considering purchasing a new boring machine to modernize one of its production lines. Two types of boring machine are available on the market. The machines are described by the following characteristics:

Item Machine A Machine B
First cost $ 7,160 $ 9,007
Service life 8 years 10 years
Salvage value $ 513 $ 1,099
Annual O&M costs $729 $ 688
CCA rate 30% 30%

Determine the break-even annual O&M costs for machine A so that the present worth of machine A is the same as that of machine B. Use a MARR (after tax) of 10% and a marginal tax rate of 30%.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!