The cost and economic projections for three machines is tabulated below. Using an annual MARR of 20%...

Question

The cost and economic projections for three machines is tabulated below. Using an annual MARR of 20% and an Equivalent Uniform Annual Worth method of analysis, determine the Incremental Rate of Return for the machine, which should be purchased.

Robert · Accepted Answer

Solution:
EUAC = -Initial cost + (Revenue - O & M) (P/A, r%, n) + Salvage value (P/F, r%, n)  
Machine A
EUAC = -270,000 + (150,000 -19,000) (P/A, r%, 4) + 108,000 (P/F, r%, 4)
         = -270,000 + 131,000 (P/A, r%, 4) + 108,000 (P/F, r%, 4)
At r% = 40%, 
EUAC = 362.35
At r% = 41%, 
EUAC = -4000.

The cost and economic projections for three machines is tabulated below. Using an annual MARR of 20% and an Equivalent Uniform Annual Worth method of analysis, determine the Incremental Rate of Return...

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