For the next 3 questions: L Company is considering two new machines that should produce considerable cost savings in its assembly operations. The cost of each machine is $14,000 and neither is expected to have a salvage value at the end of a 4-year useful life. L Company's required rate of return is 12% and the company prefers that a project return its initial outlay within the first half of the project's life. The annual after-tax cash savings for each machine are provided in the following table: Year 1 2 4 IRR Machine A $5,000 5,000 5,000 5,000 15.97% Machine B $8,000 6,000 4,000 2,000 20.53%

For the next 3 questions: L Company is considering two new machines that should produce considerable cost savings in its assembly operations. The cost of each machine is $14,000 and neither is expected to have a salvage value at the end of a 4-year useful life. L Company's required rate of return is 12% and the company prefers that a project return its initial outlay within the first half of the project's life. The annual after-tax cash savings for each machine are provided in the following table: Year 1 2 4 IRR Machine A $5,000 5,000 5,000 5,000 15.97% Machine B $8,000 6,000 4,000 2,000 20.53%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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