Press P1 P2 P3 Р4 Capital investment Useful life (years) Annual expenses $24,000 $30,400 $49,600 $52,000 5 5 5 5 Power 2,720 26,400 1,600 2,720 24,000 1,800 4,800 16,800 5,040 Labor 14,800 Maintenance 2,600 2,000 1,040 Property taxes and insurance 480 608 992 Total annual expenses $31,200 $29,128 $25,192 $22,880
A company is planning to install a new automated plastic-molding press. Four different presses are available. The initial capital investments and annual expenses for these four mutually exclusive alternatives are as shown: Assume that each press has the same output capacity (120,000 units per year) and has no market value at the end of its useful life; the selected analysis period is five years; and any additional capital invested is expected to earn at least 10% per year. Which press should be chosen if 120,000 nondefective units per year are produced by each press and all units can be sold? The selling price is $0.375 per unit. Solve by hand and by spreadsheet.
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