Corporation is considering spending

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A corporation is considering spending $3 million for a new stamping press which will save $550,000 per year (repairs, downtime, etc.) over its 7-year life. At the end of seven years, the machine could be sold for $1.8 million. An alternative is to spend $1 million on an overhaul of the existing machine. This would extend its life seven more years and save $175,000 per year. The value at the end of year 7 would be $750,000. Using B/C ratio analysis, identify the best choice. Explain your reasoning. The MARR is 12%.

Reference no: EM13771030

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