Kiwidale Dairy is considering purchasing a new ice-cream maker. Two models, Smoothie and Creamy, are available and their information is given below. Answer parts (a) and (b) below. First cost Service Life Annual profit Annual operating cost Salvage value Smoothie $16,000 12 years $4200 $1200 $2250 Creamy $38,000 12 years $10,800 $3520 $5000 a. What is Kiwidale's MARR that makes the two alternatives equivalent? Use a present worth comparison. Hint: Use i = 0.15 and i = 0.20 for the linear interpolation. The MARR that makes the two alternatives equivalent is approximately (Round to one decimal place as needed.) percent. b. It turned out that the service life of Smoothie was 14 years. Which alternative is better on the basis of the MARR computed in part (a)? Assume that each alternative can be repeated indefinitely. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 16.9%. The annual worth of the Smoothie ice-cream maker is $ (Round to the nearest cent as needed.) The annual worth of the Creamy ice-cream maker is $ The ice-cream maker is the better alternative.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Kiwidale Dairy is considering purchasing a new ice-cream maker. Two models, Smoothie and Creamy, are available and their information is given below. Answer parts (a) and (b)
below.
First cost
Service Life
Annual profit
Annual operating cost
Salvage value
Smoothie
$16,000
12 years
$4200
$1200
$2250
Creamy
$38,000
12 years
$10,800
$3520
$5000
a. What is Kiwidale's MARR that makes the two alternatives equivalent? Use a present worth comparison. Hint: Use i = 0.15 and i = 0.20 for the linear interpolation.
The MARR that makes the two alternatives equivalent is approximately
(Round to one decimal place as needed.)
percent.
b. It turned out that the service life of Smoothie was 14 years. Which alternative is better on the basis of the MARR computed in part (a)? Assume that each alternative can be
repeated indefinitely.
Click the icon to view the table of compound interest factors for discrete compounding periods when i = 16.9%.
The annual worth of the Smoothie ice-cream maker is $
(Round to the nearest cent as needed.)
The annual worth of the Creamy ice-cream maker is $
The
ice-cream maker is the better alternative.
Transcribed Image Text:Kiwidale Dairy is considering purchasing a new ice-cream maker. Two models, Smoothie and Creamy, are available and their information is given below. Answer parts (a) and (b) below. First cost Service Life Annual profit Annual operating cost Salvage value Smoothie $16,000 12 years $4200 $1200 $2250 Creamy $38,000 12 years $10,800 $3520 $5000 a. What is Kiwidale's MARR that makes the two alternatives equivalent? Use a present worth comparison. Hint: Use i = 0.15 and i = 0.20 for the linear interpolation. The MARR that makes the two alternatives equivalent is approximately (Round to one decimal place as needed.) percent. b. It turned out that the service life of Smoothie was 14 years. Which alternative is better on the basis of the MARR computed in part (a)? Assume that each alternative can be repeated indefinitely. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 16.9%. The annual worth of the Smoothie ice-cream maker is $ (Round to the nearest cent as needed.) The annual worth of the Creamy ice-cream maker is $ The ice-cream maker is the better alternative.
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