Question: You are considering two machines A and B. Machine A has an initial cost of $25,000 and lasts for 8 Years. Machine B costs $45,000
You are considering two machines A and B. Machine A has an initial cost of $25,000 and lasts for 8 Years. Machine B costs $45,000 and lasts for 4 years. If Machine B Four years from now, we can expect the cost of machine B to go up by 20%. The salvage for all machines can be safely taken as 20% of the purchase price. Machine A has yearly expenses of $2,000 which are estimated to go up by $1,000 per year. First year benefits for Machine A are estimated to be $22,000 which are estimated to go down by $1000 per year over it's 8 year life. Machine B has yearly expenses of $4,500 which are estimated to go up by $1000 per year. Yearly benefits are expected to be $26,850 and go down by $1,000 over it's 4-year life. The costs and benefits reset every time you get a new machine. What would be the difference in the EUAW of Machine A and Machine B over an 8 Year life if the rate used is 6% PYCY
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