Four different machines were under consideration for materials flow improvement on a drug bottling line. An engineer performed the economic analysis to select the best machine, but some of his calculations were removed from the report by a disgruntled employee.
All machines are assumed to have a 10 year life.
(a) Fill in the missing values in the comparison table (for ROR calculation, rounded to nearest integer)
(b) Select the best machine at MARR \( =18 \% \) per year, given options are mutually exclusive.
\begin{tabular}{lrrrr}
Machine & \( \mathbf{1} \) & \( \mathbf{2} \) & \( \mathbf{3} \) & \( \mathbf{4} \) \\
Initial cost, R & (i) & \( -600,000 \) & \( -720,000 \) & \( -980,000 \) \\
Annual cost, R per year & \( -700,000 \) & \( -640,000 \) & \( -610,000 \) & \( -580,000 \) \\
Annual savings, R per year & \( +800,000 \) & (ii) & \( +800,000 \) & \( +820,000 \) \\
Overall ROR, \( i^{*}, \% \) & \( 18.6 \% \) & \( 23.4 \% \) & \( 23.1 \% \) & \( 20.8 \% \) \\
\hline Machines compared & 2 vs. 1 & 3 vs. 2 & 4 vs. 3 \\
Incremental investment, R & \( -160,000 \) & \( ( \) iii) & \( -260,000 \) \\
Incremental cash flow, R per year & \( +60,000 \) & \( +30,000 \) & (iv) \\
ROR on increment, \( \Delta i^{*}, \% \) & \( 35.7 \% \) & \( 21.4 \% \) & (v)
\end{tabular}