please types the answers by keyboard QUESTION 17 A firm is trying to decide whic
ID: 2439988 • Letter: P
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please types the answers by keyboard
QUESTION 17 A firm is trying to decide which of the two automated packaging equipment to install. For the first option, a company can save $58,000 per year in labor but will incur an additional maintenance parts cost after the 3-year warranty period. In year 4, the maintenance parts will cost $900 and will increase in year 5 to 8 by $125 per year. For the second option, the company can save $59,500 per year but will incur additional yearly maintenance parts cost of$2500. The two options have a useful life of 8 years and no salvage value. The company uses a MARR of 9.0% per year. Which equipment should the company choose? Path: p Words:0Explanation / Answer
We will use PW criterion to choose the alterntive
PW for Alternative 1=PW of Benefits-PW of Costs
=58000(1/1.09+1/1.09^2+1/1.09^3+1/1.09^4+1/1.09^5+1/1.09^6+1/1.09^7+1/1.09^8)-(900/1.09^4+1025/1.09^5+1150/1.09^6+1275/1.09^7+1450/1.09^8)=$317604.9
PW for Alternative 2=
=59500(1/1.09+1/1.09^2+1/1.09^3+1/1.09^4+1/1.09^5+1/1.09^6+1/1.09^7+1/1.09^8)-2500(1/1.09+1/1.09^2+1/1.09^3+1/1.09^4+1/1.09^5+1/1.09^6+1/1.09^7+1/1.09^8))=$315484.7
Alternative 1 has higher PW henvce this alternative needs to be chosen
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