Each year in the United States nearly 5 billion pounds of discarded carpet end up in land fills. In response to this situation, a carpet manufacturer has decided to start a take-back program whereby obsolete carpet is reclaimed at the end of its useful life (about 7 years). The remanufactured carpet will then be recycled into the company’s supply chain. The out-of-pocket(variable) cost of recycling is $1.00 per square yard of carpet, and the remanufactured carpet can be sold for $3.00 per square yard. If the recycling equipment costs $1 million and has no market value at the end of its eight-year life, how much carpet must be remanufactured annually to make this a profitable undertaking? The company’s MARR is 15% per year.
Each year in the United States nearly 5 billion pounds of discarded carpet end up in land fills. In response to this situation, a carpet manufacturer has decided to start a take-back program whereby obsolete carpet is reclaimed at the end of its useful life (about 7 years). The remanufactured carpet will then be recycled into the company’s supply chain. The out-of-pocket
(variable) cost of recycling is $1.00 per square yard of carpet, and the remanufactured carpet can be sold for $3.00 per square yard. If the recycling equipment costs $1 million and has no market value at the end of its eight-year life, how much carpet must be remanufactured annually to make this a profitable undertaking? The company’s MARR is 15% per year.
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