\"About 1.2 million additional advanced robots are expected to be deployed in th
ID: 2556492 • Letter: #
Question
"About 1.2 million additional advanced robots are expected to be deployed in the U.S. by 2025, Boston Consulting Group says. Four industries will lead the shift — computer and electronics products; electrical equipment and appliances; transportation; and machinery — largely because more of their tasks can be automated and they deliver the biggest cost savings." (Davidson, Paul. “More robots coming to U.S. factories” USA TODAY, February 9, 2015)
The systems (Robot X and Robot Y) shown below are under consideration for an improvement to an automated packaging process. Determine which should be selected on the basis of an Annual Worth Analysis using an interest rate of 10% per year.
Robot X
Robot Y
First cost, $
–250,000
–155,000
Annual cost, $/year
–4,000
–3,000
Salvage value, $
40,000
25,000
Life, years
3
2
**The answers presented below were calculated using the appropriate factors from interest tables including all their decimal places**
Question 1 options:
Select Robot Y with AWy= $-80,405
Select Robot X with AWx= $-74,405
Select Robot X with AWx= $-92,443
Select Robot Y with AWy= $-84,443
Robot X
Robot Y
First cost, $
–250,000
–155,000
Annual cost, $/year
–4,000
–3,000
Salvage value, $
40,000
25,000
Life, years
3
2
Explanation / Answer
The Answer is - "Select Robot Y with AWy= $-80,405 "
Robot X Annual Worth
Initial Cost = $ 2,50,000
Present Value of Annual Cost = - $ 4,000 x PVAF(10%,3 Years)
= - $ 4,000 x 2.486852
= - $ 9947
Present Value of Salvage Value = $ 40,000 x PVF(10%,3 Years)
= $ 40,000 x 0.7513 = $ 30,053
Net Outflow = $ 2,50,000 + $ 9947 - $ 30,053 = $ 2,29,894
Annual Worth = $ 2,29,894 / 2.486852
= -$ 92,443
Robot Y Annual Worth
Initial Cost = $ 155000
Present Value of Annual Cost = - $ 3000 x PVAF(10%,2 Years)
= - $ 3000 x 1.7355
= - $ 5207
Present Value of Salvage Value = $ 25000 x PVF(10%,2Years)
= $ 25000 x 0.826 = $ 20661
Net Outflow = $ 155000 + $ 5207 - $ 20661 = $ 134546
Annual Worth = $ 139546 / 1.735537
= -$ 80405
"Conclusion = The Annual Worth cost in Robot Y is Less than the case of Robot X. So the Company should select the robot Y Project "
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