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  3. the croc co. is considering a new milling machine.

The CROC Co. is considering a new milling machine. They have narrowed the choices down...

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Question

Accounting

The CROC Co. is considering a new milling machine. They have narrowed the choices down to three alternatives in addition to the Null alternative. The relevant data are shown in the table below.

Data

Alternative

Economy

Regular

Deluxe

First Cost

$75,000

$125,000

$220,000

Annual Benefit

$28,000

$43,000

$79,000

M & O Costs

$8,000

$13,000

$38,000

Salvage Value

$3,000

$6,900

$16,000
All machines have a life of ten years. Using incremental rate of return analysis, which alternative should the company choose? Use a MARR of 15%.
A.

Regular
B.

Economy
C.

Null
D.

Deluxe

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