# Question: a new semiautomatic machine costs 80000 and is expected...

###### Question details

**A new semi-automatic machine costs $ 80,000 and is
expected to generate revenues of $ 40,000per year for 6 years. It
will cost $ 25,000 per year to operate the machine. At the end of 6
years,the machine will have a salvage value of $ 10,000. Evaluate
the investment in this machine usingall four methods (payback
period, present worth, uniform annual cost (UAC), and rate of
return).Neglect the salvage value for the payback period method and
the rate of return methods. Suppose, a completely automated machine
is available for $ 140,000. The annualoperating cost is $ 10,000
and the service life is expected to be 7 years. The salvage value
of thisequipment at the end of this period is $ 25,000. Revenues
from this alternative too are $ 50,000per year. Use the UAC method
to compare this investment alternative with the
semi-automaticmachine investment. Use a rate of return of 15 %
where necessary.**