New machine with identical production capacity costs

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A 4 year-old die-casting machine, of market value $3500, is 50% too small for future production needs. A new machine with identical production capacity costs $5000 installed. Both machines are expected to have economic lives of 6 years from this date. Salvage values at that date will be $1000 for the new, and $700 for the old, machine. Annual operating expenses for the new and old machines are expected to be $3500 and $4000, respectively. A double - capacity machine is also available; its installed cost is $12000, with a salvage value of $2000 at the end of its 6 - year economic life. Operating costs are expected to be $6000 per year. If the MARR is lo%, which machine should be purchased?

Reference no: EM13994718

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