A company is considering purchasing either machine A or B, given that MARR is 10%, and the company projected sales is 40,000 units. Machine A Machine B $90,000 $39,000 $1100 +.02xunits $600 +0.03xunits Initial cost $70,000 $40,000 $1000+0.03xunit $500+0.05xunit 8 years $15,000 Annual revenues Annual Operation cost Annual Maintenance cost Life span 6 years Salvage value $10,000 Draw the cash flow diagram for each machine. a. b. Compute ERR for each machine, based on computed ERR, which machine is to be selected? Explain the difference between the IRR & ERR methods as cxplained in the iecture.

A company is considering purchasing either machine A or B, given that MARR is 10%, and the company projected sales is 40,000 units. Machine A Machine B $90,000 $39,000 $1100 +.02xunits $600 +0.03xunits Initial cost $70,000 $40,000 $1000+0.03xunit $500+0.05xunit 8 years $15,000 Annual revenues Annual Operation cost Annual Maintenance cost Life span 6 years Salvage value $10,000 Draw the cash flow diagram for each machine. a. b. Compute ERR for each machine, based on computed ERR, which machine is to be selected? Explain the difference between the IRR & ERR methods as cxplained in the iecture.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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