Question: Kiwidale Dairy is considering purchasing a new ice-cream maker. Two models, Smoothie and Creamy, are available and their information is given below. (a) What is

Kiwidale Dairy is considering purchasing a new ice-cream maker. Two models, Smoothie and Creamy, are available and their information is given below. (a) What is Kiwidale's MARR that makes the two alternatives equivalent? Use a present worth comparison.

CHAPTER 4 Comparison Methods Part 1 115

Smoothie Creamy First cost $15 000 $36 000 Service life 12 years 12 years Annual profit $4200 $10 800 Annual operating cost $1200 $3520 Salvage value $2250 $5000

(b) It turned out that the service life of Smoothie was 14 years. Which alternative is better on the basis of the MARR computed in part (a)? Assume that each alternative can be repeated indefinitely.

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