A company is considering two types of equipment for its manufacturing plant. Pertinent data are asfollows:Equipment TypeABInitial Cost200 000300 000Annual Operating Cost32 00024 000Annual Labor Cost50 00032 000Other Costs14 00021 000Life10 years10 yearsSalvage ValueIf the minimum required rate of return is 15%, which equipment should be selected? Use a) annual costanalysis; b) present worth analysis; and c) equivalent uniform annual cost method.5.

Given: Two equipments=A and B MARR=15% Life=10 years

A company is considering two types of equipment for its manufacturing plant. Pertinent data are as follows: Equipment Type Initial Cost 200 000 300 000 32 000 Annual Operating Cost Annual Labor Cost Other Costs 24 000 50 000 32 000 14 000 21 000 Life 10 years 10 years Salvage Value If the minimum required rate of return is 15%, which equipment should be selected? Use a) annual cost analysis; b) present worth analysis; and c) equivalent uniform annual cost method.

A company is considering two types of equipment for its manufacturing plant. Pertinent data are as follows: Equipment Type Initial Cost 200 000 300 000 32 000 Annual Operating Cost Annual Labor Cost Other Costs 24 000 50 000 32 000 14 000 21 000 Life 10 years 10 years Salvage Value If the minimum required rate of return is 15%, which equipment should be selected? Use a) annual cost analysis; b) present worth analysis; and c) equivalent uniform annual cost method.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A company is considering two types of equipment for its manufacturing plant. Pertinent data are as
follows:
Equipment Type
A
B
Initial Cost
200 000
300 000
Annual Operating Cost
32 000
24 000
Annual Labor Cost
50 000
32 000
Other Costs
14 000
21 000
Life
10 years
10 years
Salvage Value
If the minimum required rate of return is 15%, which equipment should be selected? Use a) annual cost
analysis; b) present worth analysis; and c) equivalent uniform annual cost method.
5.

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