Alpha Electronics can purchase a needed service for $80 per unit. The same servi
ID: 2758954 • Letter: A
Question
Alpha Electronics can purchase a needed service for $80 per unit. The same service can be provided by equipment that costs $85,000 and that will have a salvage value of zero at the end of 10 years. Annual operating costs for the equipment will be $7,000 per year plus $25 per unit produced. MARR is 9.0%/year.
What is the future worth of the equipment if the expected production is 200 units/year?
What is the future worth of the equipment if the expected production is 500 units/year?
Determine the breakeven value for annual production that will return MARR on the investment in the new equipment.
Explanation / Answer
Year Annual operating cost variable cost @ 200 units level variable cost @ 300 units level saving @ 200 unit level saving @ 300 unit level Future worth at 9% @ 200 level Future worth at 9% @ 300 level 0 85,000 1 7,000 5,000 7,500 4,000 9,500 4,360 10,355 2 7,000 5,000 7,500 4,000 9,500 4,752 11,287 3 7,000 5,000 7,500 4,000 9,500 5,180 12,303 4 7,000 5,000 7,500 4,000 9,500 5,646 13,410 5 7,000 5,000 7,500 4,000 9,500 6,154 14,617 6 7,000 5,000 7,500 4,000 9,500 6,708 15,932 7 7,000 5,000 7,500 4,000 9,500 7,312 17,366 8 7,000 5,000 7,500 4,000 9,500 7,970 18,929 9 7,000 5,000 7,500 4,000 9,500 8,688 20,633 10 7,000 5,000 7,500 4,000 9,500 9,469 22,490
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