You are considering two types of machines for a manufacturing process Machine A has a first cost of $75,200, and its salvage value at the end of six years of estimated service life is $21,000 The operating costs of this machine are estimated to be $6,800 per year Extra income taxes are estimated at...

Machine A PW 13 75 200 6800 2 ...

You are considering two types of machines for a manufacturing process. Machine A has a first

Question:

You are considering two types of machines for a manufacturing process.
■ Machine A has a first cost of $75,200, and its at the end of six years of estimated service life is $21,000. The operating costs of this machine are estimated to be $6,800 per year. Extra income taxes are estimated at $2,400 per year.
■ Machine B has a first cost of $44,000, and its at the end of six years' service is estimated to be negligible. The annual operating costs will be $11,500.
Compare these two mutually exclusive alternatives by the present-worth method at i = 13%.
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...