Should be in (((((Excel spreadsheet ))))) Answer is : AW: = -$24,063 (Machine C)

Question

Should be in (((((Excel spreadsheet )))))

Answer is : AW: = -$24,063 (Machine C) (solve part (a) and part (b), Use goal seek tool for part (b)

6.20 You have two machines under consideration for an improved automated wrapping process for Snick- ers Fun Size candy bars as detailed below. (a) (b) Using an AW analysis, determine which should be selected at Assume you want machine D to be selected and are willing to extend its estimated life, if necessary. Perform this analysis to ensure D's selection using factors or a spreadsheet. 15% per year. Machine First cost, $ Annual cost, S/year Salvage value, $ Life-years -40,000 10,000 12,000 3 65,000 -12,000 25,000 6

Explanation / Answer

a) Annual Worth Analysis (Amount in $)

Thus we should select Machine C as the Annual worth of Machine C is lower than Annual worth of Machine D.

b) If we want that Machine D should be selected then its Annual worth should be less than or equal to Annual worth of Machine C (i.e. -$24,063).

Particulars Machine C Machine D (i)Annual Cost -10,000 -12,000 (ii)PVAF@15% 2.2832 (3 years) 3.7845 (6 years) (iii)PV of Annual Cost (i)*(ii) -22,832 -45,414 (iv) Salvage Value 12,000 25,000 (v) PVF@15% 0.6575 (3 years) 0.4323 (6 years) (vi) PV of Salvage Value (iv)*(v) 7,890 10,808 (vii) First Cost -40,000 -65,000 (viii) Total Cost [(iii)-(vi)+(vii)] -54942 -99606 (ix) Annual Worth [(viii)/(ii)] -24,063 (-54942/2.2832) -26,319 (-99,606/3.7845)

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