A consulting engineer is analysing to determine which machine should be invested to increase the production capacity. The machine can be either manually or automatically operated and the MARR is 15% per year. The details as tabulated in Table 1. Table 1: The cost of manually and automatically operated machine Initial investment, RM Annual maintenance cost, RM Salvage value, RM Life span, years Manual 11,000 3,500 1,000 6 Automatic 18,000 3,100 2,000 9 a) Base on present worth evaluation and salvage value was not constant every year, which machine should be selected. b) Please prepare the tabulation cash flow and from the incremental rate of return evaluation, which machine should be selected. c) Using the same information from Table 1, if the life span of both machines is 5 years and the salvage value are not expected to change, which machine should be selected.
A consulting engineer is analysing to determine which machine should be invested to increase the production capacity. The machine can be either manually or automatically operated and the MARR is 15% per year. The details as tabulated in Table 1. Table 1: The cost of manually and automatically operated machine Initial investment, RM Annual maintenance cost, RM Salvage value, RM Life span, years Manual 11,000 3,500 1,000 6 Automatic 18,000 3,100 2,000 9 a) Base on present worth evaluation and salvage value was not constant every year, which machine should be selected. b) Please prepare the tabulation cash flow and from the incremental rate of return evaluation, which machine should be selected. c) Using the same information from Table 1, if the life span of both machines is 5 years and the salvage value are not expected to change, which machine should be selected.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A consulting engineer is analysing to determine which machine should be invested to increase the production
capacity. The machine can be either manually or automatically operated and the MARR is 15% per year. The
details as tabulated in Table 1.
Table 1: The cost of manually and automatically operated machine
Initial investment, RM
Annual maintenance cost, RM
Salvage value, RM
Life span, years
Manual
11,000
3,500
1,000
6
Automatic
18,000
3,100
2,000
9
a) Base on present worth evaluation and salvage value was not constant every year, which machine should be
selected.
b) Please prepare the tabulation cash flow and from the incremental rate of return evaluation, which machine
should be selected.
c) Using the same information from Table 1, if the life span of both machines is 5 years and the salvage value are
not expected to change, which machine should be selected.
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