What is the annual equivalent cost of preferred alternative

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Reference no: EM131990188

"Komatsu Cutting Technologies is considering replacing one of its CNC machines with one that is newer and more efficient. The firm purchased the CNC machine 10 years ago at a cost of $130,000. The machine had an expected economic life of 13 years at the time of purchase and an expected salvage value of $12,000 at the end of the 13 years. The original salvage estimate is still good, and the machine has a remaining useful life of 3 years. The firm can sell this old machine now to another firm in the industry for $26,000. The new machine can be purchased for $157,000, including installation costs. It has an estimated useful (economic) life of 6 years. The new machine is expected to reduce cash operating expenses by $32,000 per year over its 6 year life, at the end of which the machine is estimated to be worth only $4,000. The company has a MARR of 15%. What is the annual equivalent cost of the preferred alternative? Include the cost savings of the new machine as revenue for the new machine. Ignore the effect of taxes and depreciation."

Reference no: EM131990188

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