Alpha Electronics can purchase a needed service for $90 per unit. The same service can be provided by equipment that costs $100,000 and that will have a salvage value of $0 at the end of 10 years. Annual operating costs for the equipment will be $7,000 per year plus $25 per unit produced. MARR is 12%/year. Solve, a. Based on a future worth analysis, should the equipment be purchased if the expected production is 200 units/year?b. Based on a future worth analysis, should the equipment be purchased ifthe expected production is 500 units/year? c. Determine the breakeven value for annual production that will return MARR on the investment in the new equipment.
Alpha Electronics can purchase a needed service for $90 per unit. The same service can be provided by equipment that costs $100,000 and that will have a salvage value of $0 at the end of 10 years. Annual operating costs for the equipment will be $7,000 per year plus $25 per unit produced. MARR is 12%/year. Solve, a. Based on a future worth analysis, should the equipment be purchased if the expected production is 200 units/year?b. Based on a future worth analysis, should the equipment be purchased ifthe expected production is 500 units/year? c. Determine the breakeven value for annual production that will return MARR on the investment in the new equipment.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Alpha Electronics can purchase a needed service for $90 per unit. The same service can be provided by equipment that costs $100,000 and that will have a salvage value of $0 at the end of 10 years. Annual operating costs for the equipment will be $7,000 per year plus $25 per unit produced. MARR is 12%/year. Solve, a. Based on a future worth analysis, should the equipment be purchased if the expected production is 200 units/year?
b. Based on a future worth analysis, should the equipment be purchased if
the expected production is 500 units/year? c. Determine the breakeven value for annual production that will return MARR on the investment in the new equipment.
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