A small company that manufactures vibration isolation platforms is trying to decide whether it should replace the current assembly system (D), which is rather labor intensive, at present or 1 year from now with a system that is more automated (C). Some components of the current system can be sold immediately for $5,000, but they will be worthless hereafter. The operating cost of the existing system is $168,000 per year. System C will cost $360,000 with a $50,000 salvage value after 4 years. Its operating cost will be $62,000 per year. If you are told to do a replacement analysis using an interest rate of 10% per year, which system would you recommend? Using replacement analysis, select: A B AW of defender = $-181,050 AW of challenger = $-165,909 Replace the defender AW of defender = $-137,500 AW of challenger = $-146,800 Replace the defender AW of defender = $-181,500 AW of challenger = $-165,909 Replace the defender AW of defender = $-173,500 AW of challenger = $-164,796 Replace the defender
A small company that manufactures vibration isolation platforms is trying to decide whether it should replace the current assembly system (D), which is rather labor intensive, at present or 1 year from now with a system that is more automated (C). Some components of the current system can be sold immediately for $5,000, but they will be worthless hereafter. The operating cost of the existing system is $168,000 per year. System C will cost $360,000 with a $50,000 salvage value after 4 years. Its operating cost will be $62,000 per year. If you are told to do a replacement analysis using an interest rate of 10% per year, which system would you recommend? Using replacement analysis, select: A B AW of defender = $-181,050 AW of challenger = $-165,909 Replace the defender AW of defender = $-137,500 AW of challenger = $-146,800 Replace the defender AW of defender = $-181,500 AW of challenger = $-165,909 Replace the defender AW of defender = $-173,500 AW of challenger = $-164,796 Replace the defender
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 30P: Mallette Manufacturing, Inc., produces washing machines, dryers, and dishwashers. Because of...
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