Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 7

Poly-Chem Plastics is considering two types of injection molding machines-hydraulic and electric. The hydraulic press (HP) will have a first cost of $600,000, annual costs of $200,000, and a salvage value of $70,000 after 5 years. Electric machine technology (EMT) will have a first cost of $800,000, annual costs of $150,000, and a salvage value of $130,000 after 5 years.
a) Use an AW-based rate of return equation to determine the ROR on the increment of investment between the two.
b) Determine which machine the company should select, if the MARR = 16% per year.
c) Plot the AW versus i graph for each alternative's cash flows, and utilize it to determine the largest MARR that will justify the EMT extra investment of $200,000.