You are selecting equipment for a project. There are two machines under consideration. They will provide the same function, but there are difference in cost, benefits, life and other details. Costs, machine prices AND salvage all go up at the rate of inflation. Costs and benefits are shown for year 1. Benefits go up by the % given. Salvage costs are given for an 12 yr old machne A or a 6 yr old machine B TODAY. Adjust with inflation. Help your employer to determine which machine is the best choice.

MARR 13.50%MARR 13.50%

Inflation 2.980%

Machine A

Initial Cost: 11,500

Salvage$ 6,100 (12 yrd old machine

Life 12 Years

Benefits PER YEAR 7,100

Benefit Inc 3.5%

Cost 2,972 per year

Machine B

Initial Cost: 7,100

Salvage$ 2,341 (6 yrd old machine

Life 6 Years

Benefits 6,500 PER YEAR

Benefit Inc 3.5%

Cost 2,843 per year

Create the net cash flow chart for both machines. Determine the Net Present Worthfor both machines.

Determine the EUAW for both machines.

Determine the NFW for both machines.

Determine the IRR for both machines

Determine the DELTA IRR .

Which machine will you select? Why?

Graph the NPW versus MARR chart for both machines (both curves on the same graph)