A Manufacturer of Automated Optical Inspection (AOI) Devices Is Deciding

Essay

A manufacturer of automated optical inspection (AOI) devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the ERR method to determine which alternative should be selected if the analysis period is 8 years and the reinvestment rate equals the company's MARR of 4% per year. $$\begin{array} { | l | l | l | } \hline \text { Alternative } & \mathrm { M } & \mathrm { N } \\\hline \text { Initial costs } & \$ 30,000 & \$ 45,000 \\\hline \text { Net annual cash flow } & \$ 4,500 & \$ 7,000 \\\hline \text { Life, years } & 8 & 8 \\\hline\end{array}$$