Question: A firm is considering a new milling equipment from among three alternatives as shown below:
|
Item
|
A
|
B
|
C
|
|
Initial Cost
|
220,000
|
125,000
|
75,000
|
|
Uniform Annual Benefits
|
79,000
|
43,000
|
28,000
|
|
Annual M&O Costs
|
38,000
|
13,000
|
8,000
|
|
Salvage Value
|
16,000
|
6,900
|
3,000
|
|
Useful Life
|
10 years
|
10 years
|
10 years
|
|
MARR
|
15%
|
15%
|
15%
|
Make a choice table from 0% to 100 percent. Using incremental rate of return analysis, which alternative, if any, should the firm choose?