Thanks in advance! Three machines are considered for a manufacturing operation M
ID: 2803714 • Letter: T
Question
Thanks in advance!
Three machines are considered for a manufacturing operation Machine C $44,000 Initial cost $33,000 $160,000 $27,000 Maintenance $6,000 Salvage Vaue 11,000 Annual $22,000 $13,000 Revenues Annual Costs $9,000 $4,000 $8,000 $3,000 Useful life, years Which machine is preferable on the basis of ANNUAL WORTH ANALYSIS if i=10% per year (Assume the selected alternative will be repeated each life cycle, in exactly the same manner) (18 points 6 points per machine) (Note: Write the formula and /or notation you are using before putting the numbers in. Show your work)Explanation / Answer
Machine A Machine B Machine C Initial cost 1 160000 33000 44000 Annual savings 27000 22000 13000 Less: AMC 6000 9000 4000 =Net annual savings 2 21000 13000 9000 Salvage value 3 11000 8000 3000 Life 4 Infinite 3 7 MARR 5 10% 10% 10% PVAF(6%, Life) 6 10.0000 2.4869 4.8684 PVIF(6%, Life) 7 0 0.751314801 0.513158118 PV of net annual savings 8 =(2 x 6) 210000 32329.07588 43815.76936 Pv of Salvage value 9 =(3 x7) 0 6010.518407 1539.474355 Total cash inflow 10 = 8 + 9 210000 38339.59429 45355.24371 Less : Outflow(Initial cost) 160000 33000 44000 Net worth 11 50000 5339.59429 1355.243714 Annuity factor 12 10.0000 2.4869 4.8684 Annual Present worth 11 by 12 5000 2147.129909 278.3745123 Annual Pv is higher for machine A therefore machine A should be selected. Please provide feedback……... thanks in advance……… :-)
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