A production plant manager has been presented with two proposals for automating an assembly process. Proposal A involve an initial cost of $15000 and an annual operating cost of $2000 per year for the next 4 years. Thereafter, the operating cost is expected to be $2700 per year. This equipment is expected to have a 20- year life with no salvage value. Proposal B requires an initial investment of $25000 and an annual operating cost of $1200 per year for the first 3 years. Thereafter, the operating cost is expected to increase by $120 per year. This equipment is expected to last 20 years and have a salvage value of $2000. If the company's MARR is 10%, which should be accepted using ROR analysis?

A production plant manager has been presented with two proposals for automating an assembly process. Proposal A involve an initial cost of $15000 and an annual operating cost of $2000 per year for the next 4 years. Thereafter, the operating cost is expected to be $2700 per year. This equipment is expected to have a 20- year life with no salvage value. Proposal B requires an initial investment of $25000 and an annual operating cost of $1200 per year for the first 3 years. Thereafter, the operating cost is expected to increase by $120 per year. This equipment is expected to last 20 years and have a salvage value of $2000. If the company's MARR is 10%, which should be accepted using ROR analysis?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: A delivery car had a first cost of $34000, an annual operating cost of $18000, and an estimated…

A: The annual worth ascertains the annual cash flow throughout the investment period which is…

Q: An IE works in the automation department of a surgical equipment manufacturing company that produces…

A: Solution: Let n cameras are required to be assembled EUAC of make option = 175000*(A/P,12%,5) +…

Q: You and your partner have become very interested in cross-country motorcycle racing and wish to…

A: Present value is the value of investment in today's dollar. The present worth is the current value…

Q: AE Criterion - Single Project* *Blank & Tarquin (2005). Engineering Economy, 7th edition. Example…

A: Calculate the initial investment:Initial investment = Cost of one system × Number of systems…

Q: To improve package tracking at a UPS transfer facility, conveyor equipment was upgraded with RFID…

A: Annual Worth (AW) Analysis is the term used to represent the consistent annual worth of all…

Q: What would its market value, call it M, have to be after 2 years in order to make its annual worth…

A: In Engineering economics, Annual Worth (AW) is used to compare different cash flow series which…

Q: A company plans to purchase new cut-and-finish equipment. Two manufacturers offered the estimates as…

A: Given the information of two manufacturers, calculate the Present Worth.

Q: For some years, Mel has contracted with several major pizza retailers for home delivery services. He…

A: Given, Two Delivery Services : Current Van and New VanMARR : 12% Current Van : Purchased 10 years…

Q: A chemical processing corporation is considering two methods to dispose of a non-hazardous chemical…

A: The present Worth Comparison technique is to look at the expense and advantages of the present year…

Q: The first cost of a certain piece of equipment is $50,000. It will have an annual operating cost of…

A: Capitalized cost is a cost that is incurred with the purchase of a fixed asset and expected to…

Q: An asset was purchased 5 years ago at a price of $52,000. It was expected to be in service for 8…

A: Here's how to calculate the selling price to recover the invested capital for the asset:1. Calculate…

Q: A delivery car had a first cost of $32,000, an annual operating cost of $15,000, and an estimated…

A: The annual worth is the net of all the benefits and costs incurred over a one-year period.…

Q: There are two investment alternatives. Alternative A has an initial investment cost of 280000 TL.…

A: Present Worth (PW), also known as Present Value (PV) or Net Present Value (NPV), is a financial…

Q: For some years, Mel has contracted with several major pizza retailers for home delivery services. He…

A: Here's a brief explanation of the process:Calculate Costs and Revenues: Identify all relevant costs…

Q: None

A: Analyzing Van Replacement with Goal SeekWe can use Goal Seek to find the market value of the current…

Q: updating at the end of year 2 at a cost of $90,000. Which process should be selected on the basis of…

A: The Present Worth (PW), also known as the Present Value, represents the value of a certain amount…

Q: Two types of robots (Cartesian and Articulated) with the following estimates are under consideration…

A: The annual worth of robots Cartesian and Articulated is shown below.

Q: A presently owned machine can last 3 more years if properly maintained at a cost of $13,000 per…

A: Given, Cost : $13,000 per year AOC : $27,000 per year After 3 years, it can be sold for $10,000…

Q: A mechanical engineer must recommend a new heating system to a commercial building owner. The owner…

A: The cost a property owner incurs to replace an old asset with a new one is referred to as…

Q: A remotely located air sampling station can be powered by solar cells or by running an electric line…

A: Future value can be calculated by using the following formula.

Q: A firm is performing an economic evaluation of the following two equipment for a production…

A: It refers to the production level at which total production revenue equals total production costs.

Q: A machine used to shread cardboard boxes for composting has a first cost of $10,000, an AOC of $7000…

A: The estimated value of an asset near the end of its useful life that allows it to be resold is known…

Q: Compare the alternatives C and D on the basis of a present worth analysis using an interest rate of…

A: The present worth of each option is the discounted value of future cash flows. It is the present…

Q: An independent contractor for a transportation company needs to determine whether she should upgrade…

A: Given upgrading cost= 4700operating cost of upgraded vehicle= $1450 per year.Salvage value=…

Question

A production plant manager has been
presented with two proposals for
automating an assembly process.
Proposal A involve an initial cost of
$15000 and an annual operating cost
of $2000 per year for the next 4 years.
Thereafter, the operating cost is
expected to be $2700 per year. This
equipment is expected to have a 20-
year life with no salvage value.
Proposal B requires an initial
investment of $25000 and an annual
operating cost of $1200 per year for
the first 3 years. Thereafter, the
operating cost is expected to increase
by $120 per year. This equipment is
expected to last 20 years and have a
salvage value of $2000. If the
company's MARR is 10%, which should
be accepted using ROR analysis?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Proposal A

Proposal B

Conclusion

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRS-GDS 5-year property class) is under consideration by a construction firm for $18,000. The instrument will be used for 6 years and be worth $3,000 at that time. The annual cost of use and maintenance will be $13,500. Alternatively, a more automated instrument (same property class) available from the manufacturer costs $27.000,with use and maintenance costs of only $8.500 and salvage value after 6 years of $1,500. The marginal tax rate is 25%, and MARR is an after-tax 12%. Determine which alternative is less costly, based upon comparison of after-tax annual worth. Show the AW values used to make your decision: Alternative 1: $ Alternative 2: S Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±10.
For some years, Mel has contracted with several major pizza retailers for home delivery services. He uses a MARR of 12% per year in all business dealings. His current van, purchased 10 years ago for $75,000, can be used for 3 more years, with an AOC of $23.000 and an estimated $25,000 trade-in value. A better-equipped van will cost $102,500, have an economic life of 6 years, an estimated trade- in value of $45,000, an AOC of $32,000 per year, and will generate an estimated $24,000 per year additional revenue. On the basis of these estimates, what market value now for the current van will make the new van equally attractive? Solve by spreadsheet or factors, as requested by your instructor. On equating the AW values of the current van and the new van, to calculate the market value now for the current van, the spreadsheet tool that should be used is GOAL SEEK The market value now for the current van that will make the new van equally attractive will be $ 62232.06 O
33 8 01:57:08 Two processes can be used for producing a polymer that reduces friction loss in engines. Process T will have a first cost of $680,000, an operating cost of $92,000 per year, and a salvage value of $80,000 after its 2-year life. Process W will have a first cost of $1,120,000, an operating cost of $25,000 per year, and a $120,000 salvage value after its 4-year life. Process W will also require updating at the end of year 2 at a cost of $90,000. Which process should be selected on the basis of a present worth analysis at a MARR of 12% per year? The present worth of process T is $- 7 and the present worth of process W is $- The process selected on the basis of the present worth analysis is process (Click to select)
Raytheon wishes to use an automated environmental chamber in the manufacture of electronic components. The chamber is to be used for rigorous reliability testing and burn-in. It is installed for $800,000, $350,000 of which is borrowed at 11% for 5 years, and will have a salvage value of $150,000 after 8 years. Its use will create an opportunity to increase sales by $650,000 per year and will have operating expenses of $250,000 per year. Corporate income taxes are 40%. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR, if the chamber is kept for 8 years. After-tax MARR is 10%. Use 7 years class depreciation for MARCS
A delivery car had a first cost of $34,000, an annual operating cost of $15,000, and an estimated $5000 salvage value after its 6-year life. Due to an economic slowdown, the car will be retained for only 4 years and must be sold now as a used vehicle. At an interest rate of 12% per year, what must the market value of the used vehicle be in order for its AW value to be the same as the AW if it had been kept for its full life cycle? The market value of the used vehicle is determined to be $ 26423
A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRS-GDS 5-year property class) is under consideration by a construction firm for $24,000. The instrument will be used for 6 years and be worth $1,000 at that time. The annual cost of use and maintenance will be $11,000. Alternatively, a more automated instrument (same property class) available from the manufacturer costs $28,500, with use and maintenance costs of only $7,500 and salvage value after 6 years of $2,500. The marginal tax rate is 25%, and MARR is an after-tax 12%.Determine which alternative is less costly, based upon comparison of after-tax annual worth. select an alternative Show the AW values used to make your decision:Alternative 1: $enter a dollar amount Alternative 2: