Question: Two machines produce the same product, but with differing levels of quality. Machine A costs $20K with a useful life of 12 years and salvage

Two machines produce the same product, but with differing levels of quality. Machine A costs $20K with a useful life of 12 years and salvage value of $4K. Annual receipts are expected to be $150K with disbursments of $138K. Machine B, producing a higher quality product, costs $30K with a useful life of 8 years and no salvage value. Annual receipts are expected to be $188K with disbursements of $170K.

Assuming a MARR of 10%, tax rate of 21%, and using straight-line depreciation (ignoring the half-year rule), determine which machine is preferred. Present your analysis in terms of:

a) present worth

b) annual worth

c) internal rate of return.

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