Depending upon the type and size of fabrication plant (fab), the need for ultrapure water (UPW) to manufacture microchips is high. There is an option of using either desalinated seawater or purified groundwater sources to provide the UPW. The initial cost estimates for the UPW system are given below. Equipment first cost is $20 million. The annual operating cost (AOC) per year is 0.5 million. The salvage value as a percentage of first cost is 5%. The annual cost of UPW is $1.44 million. Throughout the present worth analysis, the decision between seawater and groundwater switched multiple times. The confusion about the recommended source for UPW has not gone unnoticed by the general manager. Yesterday, you were asked to settle the issue by determining the first cost, XS, of the seawater option to ensure that it is the economic choice over groundwater for which PWG = $-34.96 million. The study period is set by the manager as 10 years, simply because that is the time period on the lease agreement for the building where the fab will be located. Since the seawater equipment must be refurbished or replaced after 5 years, the general manager told you to assume that the equipment will be purchased anew after 5 years of use at the same first cost. What is the maximum first cost that Angular Enterprises should pay for the seawater option? Use an MARR of 12% per year and the present worth method to select one of the systems. (Round the final answer to two decimal places.) The maximum first cost that Angular Enterprises should pay for the seawater option $ million.
Depending upon the type and size of fabrication plant (fab), the need for ultrapure water (UPW) to manufacture microchips is high. There is an option of using either desalinated seawater or purified groundwater sources to provide the UPW. The initial cost estimates for the UPW system are given below. Equipment first cost is $20 million. The annual operating cost (AOC) per year is 0.5 million. The salvage value as a percentage of first cost is 5%. The annual cost of UPW is $1.44 million. Throughout the present worth analysis, the decision between seawater and groundwater switched multiple times. The confusion about the recommended source for UPW has not gone unnoticed by the general manager. Yesterday, you were asked to settle the issue by determining the first cost, XS, of the seawater option to ensure that it is the economic choice over groundwater for which PWG = $-34.96 million. The study period is set by the manager as 10 years, simply because that is the time period on the lease agreement for the building where the fab will be located. Since the seawater equipment must be refurbished or replaced after 5 years, the general manager told you to assume that the equipment will be purchased anew after 5 years of use at the same first cost. What is the maximum first cost that Angular Enterprises should pay for the seawater option? Use an MARR of 12% per year and the present worth method to select one of the systems. (Round the final answer to two decimal places.) The maximum first cost that Angular Enterprises should pay for the seawater option $ million.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 1.1CE
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Transcribed Image Text:Depending upon the type and size of fabrication plant (fab), the need for ultrapure water (UPW) to manufacture microchips is high.
There is an option of using either desalinated seawater or purified groundwater sources to provide the UPW. The initial cost estimates
for the UPW system are given below. Equipment first cost is $20 million. The annual operating cost (AOC) per year is 0.5 million. The
salvage value as a percentage of first cost is 5%. The annual cost of UPW is $1.44 million. Throughout the present worth analysis, the
decision between seawater and groundwater switched multiple times. The confusion about the recommended source for UPW has not
gone unnoticed by the general manager. Yesterday, you were asked to settle the issue by determining the first cost, XS, of the
seawater option to ensure that it is the economic choice over groundwater for which PWG = $-34.96 million. The study period is set
by the manager as 10 years, simply because that is the time period on the lease agreement for the building where the fab will be
located. Since the seawater equipment must be refurbished or replaced after 5 years, the general manager told you to assume that
the equipment will be purchased anew after 5 years of use at the same first cost. What is the maximum first cost that Angular
Enterprises should pay for the seawater option? Use an MARR of 12% per year and the present worth method to select one of the
systems. (Round the final answer to two decimal places.)
The maximum first cost that Angular Enterprises should pay for the seawater option $
million.
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