A tomato farmer is considering three harvesters. The different harvester models have different efficiencies in picking the tomatoes and rates at which individual tomatoes are damaged. Therefore, the different harvesters are expected to result in different annual cash flows. Three models are available as described in the table below.
Item
Model A
Model B
Model C
Cost
$20,000
$17,500
$27,500
Annual Revenue
$5,000
$4,500
$5,700
Salvage Value
$750
$500
$2,500
Useful Life
14
12
15
The farmer can also rent the Model A harvester, which results in net revenues of $1,000 per year. The analysis period is 15 years, after which the farmer plans to retire. Assuming a MARR of 10%, which model (if any) should the farmer purchase to maximize her profit? Use both the IRR and ERR methods to answer this question. Your calculations must be completed using MS Excel and you must upload your MS Excel.