A certain machine costs £25 000 to purchase and install. It has salvage values and operating costs as shown in the table on the next page. The salvage value of £20 000 listed at time 0 reflects the loss of the installation costs at the time of installation. The MARR is 12%.
(a) What is the economic life of the machine?
(b) What is the equivalent annual cost over that life?
Now assume that the ALARR is 5%.
(c) What is the economic life of the machine?
(d) What is the equivalent annual cost over that life?
(e) Explain the effect of decreasing the MARR.