Considering upgrading an old icecream maker

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A dairy company is considering upgrading an old ice- cream maker. Upgrading is available at two levels: moderate and extensive. Moderate upgrading costs $6, 500 now and yields annual savings of $ 3300 in the first year, $3,000 in the second year, $2, 700 in the third year, and so on. Extensive upgrading costs $10, 550 and saves $7, 600 in the first year. The savings then decrease by 20 percent each year thereafter. If the upgraded ice cream maker will last for seven years, which upgrading option is better? Use a present worth comparison with a MARR of 8 percent.

Reference no: EM131242610

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