A plant superintendent is trying to decide between the machines detailed below. Machine A Machine B First cost $20,000 $25,000 Annual operating cost $3,500 $3,000 Salvage value $3,000 $2,000 Life, years 6 9 Assume the interest rate is 8% per year compounded annually. Determine which machine should be selected based on: a)Present Worth, with no common planning horizon for the machines b)Present Worth, with a least common multiple (LCM) planning horizon c)Present Worth, with a planning horizon of 12 years. Provide clear suggestions for modified estimates of important costs and benefits in this case.
A plant superintendent is trying to decide between the machines detailed below. Machine A Machine B First cost $20,000 $25,000 Annual operating cost $3,500 $3,000 Salvage value $3,000 $2,000 Life, years 6 9 Assume the interest rate is 8% per year compounded annually. Determine which machine should be selected based on: a)Present Worth, with no common planning horizon for the machines b)Present Worth, with a least common multiple (LCM) planning horizon c)Present Worth, with a planning horizon of 12 years. Provide clear suggestions for modified estimates of important costs and benefits in this case.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
- A plant superintendent is trying to decide between the machines detailed below.
|
|
Machine A |
Machine B |
|
First cost |
$20,000 |
$25,000 |
|
Annual operating cost |
$3,500 |
$3,000 |
|
Salvage value |
$3,000 |
$2,000 |
|
Life, years |
6 |
9 |
Assume the interest rate is 8% per year compounded annually. Determine which machine should be selected based on:
a)Present Worth, with no common planning horizon for the machines
b)Present Worth, with a least common multiple (LCM) planning horizon
c)Present Worth, with a planning horizon of 12 years. Provide clear suggestions for modified estimates of important costs and benefits in this case.
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