Annual Worth Analysis

A machine shop has decided that it needs to

purchase a new lathe. It is considering two

alternatives with cost information shown below:

Capital Cost

Expected Life

Salvage Value

Annual receipts

Annual disbursements

Interest Rate

Lathe A

S $100,000$

$5$ yrs

$$20,000$

$$50,000$

$$22,000$

$12\mathrm{.}5\%$

Lathe B

$$150,000$

$10$ yrs

$$70,000$

$$43,000$

$12\mathrm{.}5\%$