Organize the data into two options to evaluate. 1. Option 1 : Old Mover plus buy

Question

Organize the data into two options to evaluate. 1. Option 1: Old Mover plus buying New Mover. Create a CFD for this option. 2. Option 2: Old Mover plus building Conveyor System. Create a CFD for this option. Compute the Equivalent Uniform Annual Worth (EUAW) for each option and then compare to select the least costly option. Please note that both options are considered defenders since they both retain the old mover and as such you need to use the Opportunity Cost approach for both options. A concrete company currently ovrns an earth mover to transport ran material from the quarry to the crushers. Due to increased construction activity, the company needs to increase its capacity to 400,000 metric tons per year. The company is considering two options: Keeping its old mover plus buying a new mover. Keeping its old mover and building a conveyor system. If the movers alone are used, the distance to the crusher is kilometers. If the convey or is built the distance is reduced to kilometer. Using the data below and employ ing the "Opportunity Cost" replacement analysis, when appropriate, determine the EUAW of the least cost option.

Explanation / Answer

If Movers Used=Annual Cost=.01*180000*2.4*=4320

additional capacity required=400000-180000=220000

Cost=.01*220000*2.4=5280

Conveyer=400000-180000=220000

=220000*.0075*.32=528

Old Mover=180000*.32*.01=576

New Mover

Conveyer

Old Mover 16630

Conveyer 17415

If Conver is used Decrease in operating cost=(4320-576)4.56=17073

aNNNUAL=17073/4.56=3744

iF CONVEYER IS USED Annual Cash Flow=17415-3744=13671

Profit in Net Cash ouflow=16630-13671=2959

Hence Option II is better i.e. keeping the old mover and building conveyar

Outflow 70000 1 70000 Annual Operating Cost 5280 5.94 31363 Salvage Value 8000 .321 (2576) Total 98787 EAW 98787/5.94 =16630

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.