Draw the cash flow diagrams for both models

Reference no: EM132082371

Question: Two stamping machines are under consideration for purchase by a metal recycling company. The manual model will cost $25,000 to buy with an eight-year life and a $5,000 salvage value. Its annual operating costs will be $16,000. A computer-controlled model will cost $95,000 to buy and it will have a twelve-year life if upgraded at the end of year six for $15,000. Its terminal salvage value will be $23,000, with annual operating costs of $7, 500 for labor and $2, 500 for maintenance. The company's minimum attractive rate of return is 18%.

a. Draw the cash flow diagrams for both models

b. What is the annual worth of the computer-controlled machine?

c. What is the annual worth of the manual model?

d. Which machine would be selected based on its annual worth?

Reference no: EM132082371

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