What is the maximum operating cost per hour

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Reference no: EM131893510

A company is trying to decide between two machines for its manufacturing line. The Process1000 has an initial cost of $56776 and operating costs of $14 per hour. It will allow the company to produce a higher quality product, providing an annual benefit of $70474. The company will use the Process1000 10204 hours per year. The Process1000 has a useful life 4 years and an estimated salvage value of $16802 at the end of its useful life.

The Super X has an initial cost of $77901. It is a bigger machine and can process more at a time so the company will ony need to use it for 8600 hours per year. The Super X has an estimated benefit of $92417 per year. The Super X will have a useful life of 8 years and a salvage value of $29183 at the end of its useful life.

Using a MARR of 7%, what is the maximum operating cost per hour at which the Super X could run to make it equally desirable to the Process 1000?

Note- please use compound interest factors if possible and use annual worth instead of present worth. I have tried this problem a couple of times with present worth and keep getting it wrong and would like to see another way of doing it.

Reference no: EM131893510

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