Solve it by excel 620 You have two machines under consideration for an improved

Question

Solve it by excel

620 You have two machines under consideration for an improved automated wrapping process for Snick- ers Fun Size candy bars as detailed below. (a) Using an AW analysis, determine which should be selected at 15% per year. Assume you want machine D to be selected and are willing to extend its estimated life, if necessary. Perform this analysis to ensure D's selection using factors or a spreadsheet. (b) Machine First cost, $ Annual cost, S/year Salvage value, S Life, years -40,000 -10,000 12,000 -65,000 -12,000 25,000 6

Explanation / Answer

a)

Using Factor method,

AWc = -40000(A/P,15%,3) + 12000 (A/F,15%,3)-10000

= -40000*(0.15*(1+0.15)^3)/(((1+0.15)^3)-1)+12000*(0.15/(((1+0.15)^3)-1))-10000

=-24063.35

AWd =-65000(A/P,15%,6) + 25000 (A/F,15%,6)-12000

=-65000*(0.15*(1+0.15)^6)/(((1+0.15)^6)-1)+25000*(0.15/(((1+0.15)^6)-1))-12000

=-26319.47

Using excel,

AWc= -PMT(0.15,3,-40000)-PMT(0.15,3,0,12000)-10000

= -24063.35

AWd = -PMT(0.15,6,-65000)-PMT(0.15,6,0,25000)-12000

=-26319.47

So looking at the annual worth of machine C and machine D, machine has the highest annual worth, hence it needs to be selected.

b) Using factor method at project life of 10 years, the annual worth of machine D would be more than machine C

=-65000*(0.15*(1+0.15)^10)/(((1+0.15)^10)-1)+25000*(0.15/(((1+0.15)^10)-1))-12000

=-23720.08

using excel,

=-PMT(0.15,10,-65000)-PMT(0.15,10,0,25000)-12000

=-23720.08

C D First cost -40000 -65000 Annual Cost/ Year -10000 -12000 Salvage Value 12000 25000 Life 3 6 Year C D 0 -40000 -65000 1 -10000 -12000 2 -10000 -12000 3 2000 -12000 4 -12000 5 -12000 6 13000

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.