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In conducting a sensitivity analysis of a proposed
project, the present worth values of $–10,000,
$40,000, and $50,000 were believed to have
chances of 25%, 40%, and 35%, respectively. The
expected PW is closest to:
(a) $19,000 (b) $26,000
(c) $28,500 (d) $31,000
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- Leonard, a company that manufactures explosion-proof motors, is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $810,000 now and $510,000 two years from now, with annual M&O costs of $56,000 in years 1 through 10. Option 2 involves subcontracting some of the production at costs of $205,000 per year beginning now through the end of year 10. Neither option will have a significant salvage value. Use a present worth analysis to determine which option is more attractive at the company's MARR of 10% per year. The present worth of option 1 is $ and that of option 2 is $ Option (Click to select) is more attractive.A company that manufactures high-speed submersible rotary-indexing spindles is considering an upgrade of production equipment to reduce costs over the next 5 years. The company can invest $80,000 now, 1 year from now, or 2 years from now. Depending on when the investment is made, the savings will vary. The saving estimates are $23,000, $29,500, or $38,000 per year if the investment is made now, 1 year from now, or 2 years from now, respectively. The company will only invest if the ROR is at least 20% per year. Using a future worth analysis, determine if the timing of the investment will affect the return requirement and, if so, when the investment should be madeAn automaton asset with a high first cost of $10 million has required capital recovery (CR) of $1,985,000 per year. The correct interpretation of this CR value is that: (a) the owner must pay an additional $1,985,000 each year to retain the asset. (b) each year of its expected life, a net revenue of $1,985,000 must be realized to recover the $10 million first cost and the required rate of return on this investment. (c) each year of its expected life, a net revenue of $1,985,000 must be realized to recover the $10 million first cost. (d) the services provided by the asset will stop if less than $1,985,000 in net revenue is reported in any year.
- The rate of return for alternative X is 18% per year and for alternative Y is 17% per year, with Y requiring a larger initial investment. If a company has a minimum attractive rate of return of 16% per year, a)The company should select alternative X. b)The company should select alternative Y. c)The company should conduct an incremental analysis between X and Y to select the economically better alternative. d)The company should select the do-nothing alternative.An industrial engineer is considering two robots for purchase by a fiber-optic manufacturing company. Robot X will have a first cost of $80,000, an annual maintenance and operation (M&O) cost of $30,000, and a $40,000 salvage value. Robot Y will have a first cost of $97,000, an annual M&O cost of $27,000, and a $50,000 salvage value. Which should be selected on the basis of a future worth comparison at an interest rate of 15% per year? Use a 3-year study period.In capital budgeting, when the present worth over the respective life of each project is used to select independent projects, all positive net cash flows are assumed to be: (a) Reinvested at the MARR through the end of the shortest-lived project (b) Reinvested at the internal rate of return of the project through the end of the longest-lived project (c) Reinvested at the MARR through the least common multiple of years of all of the projects (d) Reinvested at the MARR through the end of the longest-lived project
- Dexcon Technologies, Inc., is evaluating two alternatives to produce its new plastic filament with low friction properties for creating custom bearings for 3-D printers. The estimates associated with each alternative are shown below. Using a MARR of 16% per year, which alternative has the better present worth and what is that value (select the closest value)? Method First Cost AOC, per Year Salvage Value Life DDM $170,000 $65,000 $4,000 2 years LS $350,000 $40,000 $29,000 4 years DDM with a PW--$473,000 LS with a PW --$445,900 LS with a PW --$222,055 DDM with a PW--$109,300MARR is 10% per year. Compare the two plans using the Capitalized Cost Method. The first plan calls for an initial investment of $500,000, with expenses of $20,000 per year for the first 20 years and $30,000 per year thereafter. It also requires an expenditure of $200,000 20 years after the initial investment, and this will repeat every 20 years thereafter. The second plan has an initial investment of $700,000 followed by a single (one time) investment of $300,000 30 years later. It will incur annual expenses of $10,000 forever. Based on the Capitalized Cost measure.Which plan would you recommend?Copper and nickel electroless plating processes are under consideration for printed circuit boards. The copper process has fixed costs of $110,000 per year with a variable cost of $66 per batch. The nickel process has a fixed cost of $89,500 per year and a variable cost of $90 per batch. Determine the number of batches that must be produced each year in order for the processes to break even. The number of batches that must be produced each year in order for the processes to break even is batches.
- An IE works in the automation department of a surgical equipment manufacturing company that produces specially ordered equipment for hospitals. To upgrade the quality of the assembly process of the camera used in laparoscopic surgery probes, two approaches are available: make and buy. The make alternative has an initial equipment cost of $175,000, a life of 5 years, a $25,000 salvage value, a processing cost of $3,000 per camera, and an M&O cost of $90,000. The buy alternative requires contracting the assembly operation externally at a cost of $7,250 per camera. If the MARR is 12% per year, how many cameras per year must be assembled to justify the make alternative? 27 cameras must be assembled per year to justify the make alternative.Two methods can be used to produce solar panels for electric power generation. Method 1 will have an initial cost of $800,000, an AOC of $150,000 per year, and $125,000 salvage value after its 3-year life. Method 2 will cost $910,000 with an AOC of $125,000 and a $230,000 salvage value after its 5-year life. Assume your boss asked you to determine which method is better, but she wants the analysis done over a three-year planning period. You estimate the salvage value of Method 2 will be 40% higher after three years than it is after five years. If the MARR is 14% per year, which method should the company select? Which method should the company select?The Texas Department of Transportation (TxDOT) is considering two designs for crash barriers along a reconstructed portion of 1-10. Design 2B will cost $3 million to install and $135,000 per year to maintain. Design 4R will cost $3.7 million to install and $55,000 per year to maintain. Determine which design should be selected based on a rate of return analysis if TxDOT uses a MARR of 6% per year and a 20-year project period. The rate of return is Design (Click to select) is selected. (Click to select) 28 4R %. 2B