A machine is purchased for $100,000 and can be sold at the end of five years for

Question

A machine is purchased for $100,000 and can be sold at the end of five years for $20,000. The machine is capable of producing 1250 parts per year and the operating and maintenance cost is $10,500/year. If MARR=12% what is the cost per part?

A machine is purchased for $100,000 and can be sold at the end of five years for $20,000. The machine is capable of producing 1250 parts per year and the operating and maintenance cost is $10,500/year. If MARR=12% what is the cost per part?

$25.44/pc

$29.97/pc

$28.07/pc

$30.20/pc

A machine is purchased for $100,000 and can be sold at the end of five years for $20,000. The machine is capable of producing 1250 parts per year and the operating and maintenance cost is $10,500/year. If MARR=12% what is the cost per part?

Explanation / Answer

Ans: $28.07/pc

Explanation:

Annual Expenditure = 100,000(A/P, 12%, 5) + 10,500 - 20,000(A/F, 12%, 5)

                            = 100,000(0.2774) + 10,500 - 20,000(0.1574)

                            = 27,740 + 10,500 - 3148

                            = $35,092

cost per part = $35,092 / 1250 = $28.07

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