Each year in the United States nearly 4.6 billion pounds of discarded carpet end

Question

Each year in the United States nearly 4.6 billion pounds of discarded carpet end up in land flls. In response to this situation, the carpet manufacturer has decided to start a take-back program whereby obsolete carpet is reclaimed at the end of its useful life (about 7 years). The remanufactured carpet will then be recycled into the company's supply chain. The out-of-pocket (variable) cost of recycling is $1.50 per square yard of carpet, and the remanufactured carpet can be sold for $2.75 per square yard. If the recycling equipment costs $0.9 million and has no market value at the end of its eight-year life, how much carpet must be remanufactured annually to make this a profitable undertaking? The company's MARR is 12% per year

Explanation / Answer

Cost of recycling machine is $.9million and it's life is 8 years . So for the one year it's cost would be

=90000÷8

112500

Company wants to get minimum return of 12% per annum .

Company,'s cosr for one year is 112500. For getting 12% return company would require to get

=112500×12÷100

13500

So compan1 required to earn$ 112500+13500=$126000.

Cost of recycling per square yard is $1.50 and company sold it @ $2.75 per square yard. So in procuring 1 square yard company receive $ 1.25

Company is suppose to earn $126000. So he required to manufacture

=126000÷1.25

=100800 square yard to produce annually.

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