Determine the preferred alternative

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Reference no: EM13191289

The Ajax Manufacturing Company wishes to choose one of the following machines.
Machine 1 Machine 2 Machine 3
Initial cost $12,000 $15,000 $21,000
Planning horizon 5 years 5 years 5 years
Salvage value $1200 $2,000 $3,000
Revenue years 1,..,k $3,000 +500(k -1) $3,500 + 750(k-1) $4,500 + 1000(k -1)
Operating and
maintenance
costs years 1, ..., k $800 (1.1)k-1 $800 (1.08)k-1 $800 + 100(k -1)

MARR is 12% and the planning horizon is 5 years. Based on the internal rate of return determine the preferred alternative.

Reference no: EM13191289

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