There are two alternative machines for a manufacturing process. Both machines have the same output rate, but they differ in costs. Machine A costs $20,000 to set up and $8,000 per year to operate. It must be completely replaced every 3 years, and it has no salvage value. Machine B costs $50,000 to set up and $2,160 per year to operate. It should last for 5 years and has no salvage value. The costs of two machines are shown below. 012345 Machine A20,0008,0008,0008,000 Machine B50,0002,1602,1602,1602,1602,160 Assuming the cost of capital is 10%,1. find the equivalent annual cost of Machine A in Box 1. Round it to a whole dollar, and no comma or the dollar sign.2. find the EAC of Machine B in Box 2. The same format as box 1.3. Based on the equivalent annual cost method, type in Box 3 which machine do you recommend, Machine A or Machine B. Question 20 options:Blank # 1 Blank # 2 Blank # 3

The cost structure of two machine A and B are shown belowMachine AMachine BInitial…

Answered: here are two alternative machines for a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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There are two alternative machines for a manufacturing process. Both machines have the same output rate, but they differ in costs. Machine A costs $20,000 to set up and $8,000 per year to operate. It must be completely replaced every 3 years, and it has no salvage value. Machine B costs $50,000 to set up and $2,160 per year to operate. It should last for 5 years and has no salvage value. The costs of two machines are shown below.

	0	1	2	3	4	5
Machine A	20,000	8,000	8,000	8,000
Machine B	50,000	2,160	2,160	2,160	2,160	2,160

Assuming the cost of capital is 10%,
1. find the equivalent annual cost of Machine A in Box 1. Round it to a whole dollar, and no comma or the dollar sign.
2. find the EAC of Machine B in Box 2. The same format as box 1.
3. Based on the equivalent annual cost method, type in Box 3 which machine do you recommend, Machine A or Machine B.

Question 20 options:

Blank # 1
Blank # 2
Blank # 3

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