What is the equivalent annual worth of the new machine

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Reference no: EM13834764

An existing machine is worth $2,500 today. Its $8,000 operating cost for this year is predicted to increase by $1,000 annually, owing to deterioration. It will be retired in 4 years, when its salvage value will be zero. A new improved machine that satisfactory perform the same function as the existing machine can be purchased for $16,000 and is expected to have relatively constant annual operating costs of $6,000 to the end of its 7 year economic life, at which time the salvage value will be $1,500. No major improvements are expected in designs for machine of this type within 7 years. If the minimum attractive rate of return is 12%, what is the equivalent annual worth of the new (chanllenger) machine?

a. +$9,357

b. -$16,000

c. -$9,357

d. $1,500

Reference no: EM13834764

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