Question: Two types of machine tools are available for performing a particular task in a manufacturing firm. The estimated cost and salvage values are given as

Two types of machine tools are available for performing a particular task in a manufacturing firm. The estimated cost and salvage values are given as follows:

The effective income tax rate is 40%. Make a comparison after income tax for both machines, using a 10% MARR.

Machine A Machine B First cost Operating cost $40,000 $4,000 $50,000 $2,000 per year Service life Salvage value Depreciation method 6 years $5,000 MACRS (GDS) 5 years 8 years $3,000 MACRS (GDS) 5 years Recovery period

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