solve using engineering economics way ehouse is considering replacing one of its
ID: 1173802 • Letter: S
Question
solve using engineering economics way
ehouse is considering replacing one of its existing material handling equipment and either points) A uing a new system. The existing equipment has an annual O&M; cost of $30,000, a remaining life of 6 yeurent will cost $90,000 initially, have an annual O&M; cost of $15,000, and have a market value of war 3 (0pigasi nan estimated salvage value of $4,000 at that time. rchasing o and equip% years. If new equipment is pu years. rchased, the existing equipment will be traded in for $15,000. ew new equipment will cost $20,000 per year, payable at the beginning of the year and operating costs L essi 500 per year, payable at the end of the year. If new equipment is leased, the existing equipment will be of $6 for $10,000. sormpute the annual costs of (a) keeping the existing equipment, (b) purchasing new equipment, and (c) leasing new equipment based on a planning horizon of 6 years. MARR is 10% per year compounded annually. Based on an annual cost comparison, what is your recommendation?Explanation / Answer
At Chegg we try to help student.Do give a thumbs up for the answer and the efforts put in.
Answer-
a Cost of existing machine per annum 30000 Life 6 years salvage value 4000 So present cost of the machinery 30000*6-4000 Estimated existing cost 176000 Cost of new machine 90000 One time Annual cost 15000 Leasing new equipment 20000 per year operating cost 6500 If leased existing sold for 10000 a. Keeping the existing equipment The cost is anuualy 30000 Time 6 years Salvage value 4000 Hence total cost 30000*6-4000 Total cost 176000 b. purchasing new equipment one time cost 90000 Annual cost 15000 Number of years 6 Total cost 90000+15000*6 Total cost 180000 c. Leasing new equipment Leasing new equipment 20000 per year operating cost 6500 If leased existing sold for 10000 Number of years 6 Total cost 20000+6500*6-10000 Total cost 49000 Based on the above the recommendation is to go with the lease model because this model will give optimum cost and will also reduce the liability of continuously maintaining the machine.Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.