A large food-processing corporation is considering using laser technology to speed up and eliminate waste in the potato-peeling process. To implement the system, the company anticipates needing $3 million to purchase the industrial-strength lasers. The system will save $1,200,000 per year in labor and materials. However, it will incur an additional operating and maintenance cost of $250,000 per year. Annual income taxes will also increase by $150,000. The system is expected to have a 10-year service life and a salvage value of about $200,000. If the company's MARR is 18%,justify the economics of the project using the PW method.
A large food-processing corporation is considering using laser technology to speed up and eliminate waste in the potato-peeling process. To implement the system, the company anticipates needing $3 million to purchase the industrial-strength lasers. The system will save $1,200,000 per year in labor and materials. However, it will incur an additional operating and maintenance cost of $250,000 per year. Annual income taxes will also increase by $150,000. The system is expected to have a 10-year service life and a salvage value of about $200,000. If the company's MARR is 18%,justify the economics of the project using the PW method.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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A large food-processing corporation is considering using laser technology to speed up and eliminate waste in the potato-peeling process. To implement the system, the company anticipates needing $3 million to purchase the industrial-strength lasers. The system will save $1,200,000 per year in labor and materials. However, it will incur an additional operating and maintenance cost of $250,000 per year. Annual income taxes will also increase by $150,000. The system is expected to have a 10-year service life and a salvage value of about $200,000. If the company's MARR is 18%,justify the economics of the project using the PW method.
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