Question

Mty NotesAsk Your Teacher 4. /2 points A company is considering a new piece of equipment that will save them $1878 per year. The machine costs $9830. After 8 years in service the machine will have to be replaced. It has no salvage value at the end of eight years Given a MARR of 11.9% per year, what is the present worth of the machine? S Sofia an intern from Temple Engineering School finds an alternative manufacturer who offers the same piece of equipment with a guarantee that it will work for 16 years. It cost $10700 and offers the exact same savings for 16 years. It also has no salvage value. What is the present worth of this machine?$ Submit Answer Save Progress Practice Another Version

Answer 1

4. MARR = 11.9%

initial cost = 9830, life = 8 yrs

Savings per year = 1878

PW = -9830 + 1878 * (P/A,11.9%,8) = -9830 + 1878*4.985044 = -468.09

When initial cost = 10700, life = 16 years

PW = -10700 + 1878 * (P/A,11.9%,16) = -10700 + 1878*7.012859 = 2470.15