The two machines shown are being considered for a chip manufacturing operation. Assume the MARR is a real return of 12% per year and that the inflation rate is 7% per year. Which machine should be selected on the basis of an annual worth analysis if the estimates are in (a) constant-value dollars, and (b) future dollars? Solve by hand and using a spreadsheet. Machine A B First cost, $ −150,000 −1,025,000 M&O, $ per year −70,000 −5,000 Salvage value, $ 40,000 200,000 Life, years 5 ∞
The two machines shown are being considered for a chip manufacturing operation. Assume the MARR is a real return of 12% per year and that the inflation rate is 7% per year. Which machine should be selected on the basis of an annual worth analysis if the estimates are in (a) constant-value dollars, and (b) future dollars? Solve by hand and using a spreadsheet. Machine A B First cost, $ −150,000 −1,025,000 M&O, $ per year −70,000 −5,000 Salvage value, $ 40,000 200,000 Life, years 5 ∞
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The two machines shown are being considered for a
chip manufacturing operation. Assume the MARR is
a real return of 12% per year and that the inflation rate
is 7% per year. Which machine should be selected on
the basis of an annual worth analysis if the estimates
are in (a) constant-value dollars, and (b) future dollars?
Solve by hand and using a spreadsheet.
Machine A B
First cost, $ −150,000 −1,025,000
M&O, $ per year −70,000 −5,000
Salvage value, $ 40,000 200,000
Life, years 5 ∞
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