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A small manufacturing firm is considering purchasing a new boring machine to modernize one of its production lines.

Two types of boring machine are available on the market. The machines are described by the following characteristics:

Item Machine A Machine B

First cost $7,234 $8,805

Service life 8 years 10 years

Salvage value $569 $1,026

Annual O&M costs $729 $606

CCA rate 30% 30%

Determine the break-even annual O&M costs for machine A so that the present worth of machine A is the same as that of machine B. Use a MARR (after tax) of 10% and a marginal tax rate of 30%.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92823133

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