Question

A machine having a first cost of $20,000 is expected to save $1500 in thefirst year of operation, and the savings should increase by $200 every year until (and including) the ninth year, thereafter the savings will decrease by $150 until (and including) the 16th year.

Using equivalent uniform annual worth, is this machine economical? Assume a MARR of 9%.

Answer 1

This machine is not economical. A further explanation is provided below.

Step-by-step explanation:

Given:

First cost,

= $20,000

Saving,

= $1500

Increase by,

= $200

Decrease by,

= $150

Now,

The EUAW will be:

=
`-20000+1500((P)/(F), 9 \ percent,1 )+1700((P)/(F), 9 \ percent,8 )+1550((P)/(F), 9 \ percent,7 )`

=
`-20000+1500* 0.9174+1700* 0.5018+1550* 0.5470`

=
`-20,000 + 1,371.1 + 856.06 + 847.85`

=
`-16,294.99` ($) negative

Thus this machine is not economical.