Only one of four different machines can be purchased for Glass Act Products. An engineer performed the following analysis to select the best machine, all of which have a 10-year life. Which machine, if any, should the company select at a MARR of 22% per year?
|
|
1
|
2
|
3
|
4
|
|
Initial cost, $
|
-44,000
|
-60,000
|
-72,000
|
-98,000
|
|
Annual cost, $ per year
|
-70,000
|
-64,000
|
-61,000
|
-58,000
|
|
Annual savings,
|
+80,000
|
+80,000
|
+80,000
|
+82,000
|
|
$ per year
|
|
|
|
|
|
Overall ROR, %
|
18.6
|
23.4
|
23.1
|
20.8
|
|
Machines compared
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2 to 1
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3 to 2
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4 to 3
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|
|
Incremental
|
-16,000
|
-12,000
|
-26,000
|
|
|
investment, $
|
|
|
|
|
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Incremental cash fl ow,
|
+6,000
|
+3,000
|
+5,000
|
|
|
$ per year
|
|
|
|
|
|
ROR on increment, %
|
35.7
|
21.4
|
14.1
|
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