A process control manager is considering two robots to improve materials handling capacity in the production of rigid shaft couplings that mate dissimilar drive components. Robot X has a first cost of $84,000, an annual M&O cost of $31,000, a $40,000 salvage value, and will improve revenues by $96,000 per year. Robot Y has a first cost of $146,000, an annual M&O cost of $28,000, a $47,000 salvage value, and will increase revenues by $119,000 per year. The company’s MARR is 15% per year and it uses a 3-year study period for economic evaluations. Which one should the manager select (a) on the basis of ROR values, and (b) on the basis of the incremental ROR value? (c) Which is the correct selection basis? Perform the analysis by hand or spreadsheet, as instructed.
A process control manager is considering two robots
to improve materials handling capacity in the production
of rigid shaft couplings that mate dissimilar
drive components. Robot X has a first cost of $84,000,
an annual M&O cost of $31,000, a $40,000 salvage
value, and will improve revenues by $96,000 per
year. Robot Y has a first cost of $146,000, an annual
M&O cost of $28,000, a $47,000 salvage value, and
will increase revenues by $119,000 per year. The
company’s MARR is 15% per year and it uses a
3-year study period for economic evaluations. Which
one should the manager select (a) on the basis of ROR values, and (b) on the basis of the incremental
ROR value? (c) Which is the correct selection basis?
Perform the analysis by hand or spreadsheet, as instructed.
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