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1. A French company, is ce alternatives for the p\' ich company, is considering

ID: 1105689 • Letter: 1

Question

1. A French company, is ce alternatives for the p' ich company, is considering the following two equipment machines are consideration are in table below. s for the plant in Tennessee. The cost information for the two Initial cost Machine X Machine Y Benefits/year $80,000 $66,000 $ 12,000 for the first 10 years $9,000 per year for and $8,000 for the 20 years. next 10 Life years MARR 20 years $ 20,000 Find the NPW of machine y 10% Salvage value | $30,000 2. Given the cash flows in table below. Determine the value of P. i=3% per year |Year Year o 1 2 3 4 5 O 1 34 Cash Flow 5 -P |100 200 300 400 400

Explanation / Answer

(1)

NPW, Machine Y ($) = - 66,000 + 9,000 x P/A(10%, 20) + 20,000 x P/F(10%, 20)

= - 66,000 + 9,000 x 8.5136** + 20,000 x 0.1486** = - 66,000 + 76,622 + 2,972

= 13,594

**From P/A & P/F factor tables

(2)

P = 100 x P/F(3%, 1) + 200 x P/F(3%, 2) + 300 x P/F(3%, 3) + 400 x P/F(3%, 4) + 400 x P/F(3%, 5)

= 100 x 0.9709** + 200 x 0.9426** + 300 x 0.9151** + 400 x 0.888**5 + 400 x 0.8626**

= 97.09 + 188.52 + 274.53 + 355.4 + 345.04

= 1,260.58

**From P/F Factor table