Items CMS Optlon FMS Option Investment $4,500,000 $12,500,000 Total annual operating costs Net salvage value $7,412,920 $5,504,100 $500,000 $1,000,000
Items CMS Optlon FMS Option Investment $4,500,000 $12,500,000 Total annual operating costs Net salvage value $7,412,920 $5,504,100 $500,000 $1,000,000
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Falk Corporation is considering two types of manufacturing systems to produce its shaft couplings over six years: (1) a cellular manufacturing system (CMS) and (2) a flexible manufacturing system (FMS). The average number of pieces to be produced on either system would be 544,000 per year. Operating costs, initial investment, and salvage value for each alternative are estimated as follows:
The firm's MARR is 15%. Which alternative would be a better choice based on the
Transcribed Image Text:Items
CMS Optlon
FMS Option
Investment
$4,500,000
$12,500,000
Total annual operating costs
Net salvage value
$7,412,920
$5,504,100
$500,000
$1,000,000
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