1) Machine A costs $8,000, lasts 3 years and has a salvage value S of $1,500. Machine B costs $12,000, lasts 2 years and has a salvage value of $4,000.
The machines can be purchased at the same price with the same salvage value in the future, and are needed for a 6 year project. Which Machine would you purchase and why?
Provide justification using the Net Present Worth analysis and the Annualized Equivalent Cost analysis. Interest is 10% annual rate, compounded annually.
Net present worth analysis__________________
Annualized equivalent cost analysis______________________________________________
2) You purchase a machine for $30,000 now, with a salvage value of $12,000 in 15 years. The machine will have O&M costs and cost of raw goods totaling $20,000 per year.
The machine will produce 2,500 high-quality parts per year. If i = 8% annual rate compounded annually, what is the cost per high-quality part produced?
3) You can choose between two purchases: Machine A or Machine B. You need a machine for a total of 6 years, and if i is 8% annual rate compounded annually, which machine should be purchased? Show work and justify answer.
Machine A costs $15,000 and has a salvage value of $5,000 after 3 years. You can purchase a new machine in the future at the same price with the same salvage value.
Machine B costs $20,000 and has a salvage value of $6,000 after 4 years. You can lease a Machine B for $4,000 per year after year 4.