Please show step by step solution and show cash flow digrams for each mechine do
ID: 1192551 • Letter: P
Question
Please show step by step solution and show cash flow digrams for each mechine don't use excel to solve this question. Thank you The manager in a canned food processing plant is trying to decide between two labeling machines. 6-51 Machine A Machine B First cost Maintenance and $15,000 $25,000 1,600 400 operating costs Annual benefit Salvage value Useful life, in years 8,000 3,000 13,000 6,000 10 Assume a n interest rate of 12%. Use annual cash flow analysis to determine which machine should be chosen.
Explanation / Answer
Machine A:
Equivalent Uniform Annual Worth =-15,000(P/A,10,7) - 1,600 + 3,000(P/F,10,7)
= -15,000(.2054) - 1,600 + 3,000(.1054)
= - 4,365
Machine B
Equivalent Uniform Annual Worth = -25,000(P/A,10,10) - 400 + 6,000(P/F,10,10)
= -25,000(.1627) - 400 + 6,000(.0627)
= -4,091
Therefore choose Machine B.