Problem 3) The PARS Co. is considering purchasing a new widget machine. The company interest rate (MARR) is 12%. Which (if either) of the two new widget machines for which annual cost data is available should PARS purchase? Use Incremental rate of return analysis. The following annual cost data is available for the two possible alternatives: Data WIDGETS-R-US WEE-WILLY WIDGETS Useful Life, Years 6. First Cost $2,780,000 $2,250,000 Salvage Value 85,000 70,000 Annual Benefit 870,000 675,000 M&O 82,000 60,000 M&O Gradient 8,000 10,000

Problem 3) The PARS Co. is considering purchasing a new widget machine. The company interest rate (MARR) is 12%. Which (if either) of the two new widget machines for which annual cost data is available should PARS purchase? Use Incremental rate of return analysis. The following annual cost data is available for the two possible alternatives: Data WIDGETS-R-US WEE-WILLY WIDGETS Useful Life, Years 6. First Cost $2,780,000 $2,250,000 Salvage Value 85,000 70,000 Annual Benefit 870,000 675,000 M&O 82,000 60,000 M&O Gradient 8,000 10,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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Problem 3)
The PARS Co. is considering purchasing a new widget machine. The company interest
rate (MARR) is 12%. Which (if either) of the two new widget machines for which annual
cost data is available should PARS purchase? Use Incremental rate of return analysis.
The following annual cost data is available for the two possible alternatives:
Data
WIDGETS-R-US
WEE-WILLY WIDGETS
Useful Life, Years
6
First Cost
$2,780,000
$2,250,000
Salvage Value
85,000
70,000
Annual Benefit
870,000
675,000
M&O
82,000
60,000
M&O Gradient
8,000
10,000

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