The company you work for purchased a textile processing machine 3 years ago for $182,860. You are considering upgrading the machine to increase capacity. To increase capacity you must invest $57,800 to upgrade the existing machine. The market value of the existing machine today and into the future is shown in the table below. Also shown are the expected operating costs. You have been asked to consider purchasing a new machine instead of upgrading the existing machine. The purchase price of the new machine is $232,690 The market values and operating costs of the new machine are also shown in the table below. Your manager has stated that a three year supply contract has been secured with a customer. They have asked you to perform a financial analysis to determine whether or not to keep the existing machine or buy a new one. Your manager has specifically stated that she is only interested in a three year planning horizon. Should you keep the existing machine or purchase the proposed new machine? MARR = 14.00% Year Existing Machine Market Value Annual Operating Costs Proposed Machine Market Value Annual Operating Costs 0 $135,800 $52,336 1 $122,000 $52,486 2 $110,000 $52,636 3 $99,000 $52,786 4 $89,000 $52,936 5 $80,000 $53,086 6 $72,000 $53,236 7 $65,000 $53,386 8 $59,000 $53,536 9 10 $53,000 $48,000 $53,686 $53,836 $250,000 $225,000 $203,000 $183,000 $165,000 $149,000 $134,000 $121,000 $109,000 $98,000 $88,000 $58,800 $59,425 $60,050 $60,675 $61,300 $61,925 $62,550 $63,175 $63,800 $64,425 $65,050

The company you work for purchased a textile processing machine 3 years ago for $182,860. You are considering upgrading the machine to increase capacity To increase capacity you must invest $57,800 to upgrade the existing machine. The market value of the existing machine today and into the future is shown in the table below. Also shown are the expected operating costs. You have been asked to consider purchasing a new machine instead of upgrading the existing machine. The purchase price of the new machine is $232,690 The market values and operating costs of the new machine are also shown in the table below. Your manager has stated that a three year supply contract has been secured with a customer. They have asked you to perform a financial analysis to determine whether or not to keep the existing machine or buy a new one. Your manager has specifically stated that she is only interested in a three year planning horizon Should you keep the existing machine or purchase the proposed new machine? MARR = 14.00% Existing Machine Proposed Machine Annual Operating Annual Operating Market Value Market Value Year Costs Costs 0 $135,800 $52.336 $250,000 $58,800 $122,000 $52,486 $225,000 $59,425 2 $110,000 $52,636 $203,000 $60,050 $99,000 $52,786 $183,000 $60,675 $89,000 $52.936 $165,000 4 $61,300 $80,000 $149,000 $53,086 5 $61,925 $53,236 $72,000 $134,000 $62,550 6 $53,386 $63,175 $121.000 $65,000 7 $53,536 $59,000 $109,000 $63.800 8 $53,686 $64,425 $98,000 $53,000 9 $53,836 $48,000 $65,050 $88,000 The company you work for purchased a textile processing machine 3 years ago for $182,860. You are considering upgrading the machine to increase capacity To increase capacity you must invest $57,800 to upgrade the existing machine. The market value of the existing machine today and into the future is shown in the table below. Also shown are the expected operating costs. You have been asked to consider purchasing a new machine instead of upgrading the existing machine. The purchase price of the new machine is $232,690 The market values and operating costs of the new machine are also shown in the table below. Your manager has stated that a three year supply contract has been secured with a customer. They have asked you to perform a financial analysis to determine whether or not to keep the existing machine or buy a new one. Your manager has specifically stated that she is only interested in a three year planning horizon Should you keep the existing machine or purchase the proposed new machine? MARR = 14.00% Existing Machine Proposed Machine Annual Operating Annual Operating Market Value Market Value Year Costs Costs 0 $135,800 $52.336 $250,000 $58,800 $122,000 $52,486 $225,000 $59,425 2 $110,000 $52,636 $203,000 $60,050 $99,000 $52,786 $183,000 $60,675 $89,000 $52.936 $165,000 4 $61,300 $80,000 $149,000 $53,086 5 $61,925 $53,236 $72,000 $134,000 $62,550 6 $53,386 $63,175 $121.000 $65,000 7 $53,536 $59,000 $109,000 $63.800 8 $53,686 $64,425 $98,000 $53,000 9 $53,836 $48,000 $65,050 $88,000