You are evaluating three alternative machines for a production line. Cash flows and expected lives of the
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Question:
You are evaluating three alternative machines for a production line. Cash flows and expected lives of the machines are presented below. MARR for your company is 17% per year. Determine which alternative is economically better using (a) the EAC method, and (b) EAC method with a 4 year study period.
Please show how to work using excel. Thanks!
| Machine 1 | Machine 2 | Machine 3 | |
| Initial cost | -$50,000.00 | -$75,000.00 | -$35,000.00 |
| AOC ($/year) | -$27,000.00 | $28,000.00 | -$33,000.00 |
| Life (years) | 4 | 9 | 5 |
| Salvage value | $10,000.00 | $7,000.00 | $7,000.00 |
| Estimated value after 4 years | $10,000.00 | $50,000.00 | $10,000.00 |
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