The new prototype machine tool that your company just purchased cost $30,000. This tool will be used for 2 years. At the end of this useful life its expected salvage value is $18,000. The machine will be used for 6,000 hours during the first year and 8,000 hours the second year. The expected annual net savings will be $35,000 during the first year and $42,000 the second year. Assume that i=12%. (Hint: Do not calculate present worth when answering the following questions.)
a. Determine the annual capital cost (ownership cost) for the tool purchase.
b. Determine the equivalent annual savings for the project.
c. Determine the equivalent net savings per machine hour.