Two alternative machines will produce the same product, but one is capable of hi
ID: 2784645 • Letter: T
Question
Two alternative machines will produce the same product, but one is capable of higher-quality work, which can be expected to return greater revenue. The following are relevant data. Determine which is the better alternative, assuming repeatability and using SL depreciation, an income-tax rate of 41%, and an after-tax MARR of g%. Capital investment Life Terminal BV (and MV) Annual receipts Annual expenses Machine A $16,000 13 years $4,500 143,000 129,000 Machine B $29,000 7 years S1,500 8186,000 8160,000 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 9% per year. Calculate the AW value for the Machine A. AWA(996) $ (Round to the nearest dollar.)Explanation / Answer
Investing in Machine B would be beneficial as its giving a higher NPV of $ 57134 in against of A of $ 50027
For Machine A:
For Machine B
A 0 1 2 3 4 5 6 7 8 9 10 11 12 13 Cap Investment -16000 4500 Receipt less Exp 14000 14000 14000 14000 14000 14000 14000 14000 14000 14000 14000 14000 14000 Tax cost -5377 -5377 -5377 -5377 -5377 -5377 -5377 -5377 -5377 -5377 -5377 -5377 -5377 Cash Flow -16000 8623 8623 8623 8623 8623 8623 8623 8623 8623 8623 8623 8623 13123 PV Factor 1 0.92 0.84 0.77 0.71 0.65 0.60 0.55 0.50 0.46 0.42 0.39 0.36 0.33 PV of CF -16000 7911.009 7257.807 6658.538 6108.751 5604.358 5141.613 4717.076 4327.593 3970.269 3642.448 3341.696 3065.776 4280.442 NPV 50027.38