The Mwatex Textile Company is considering two mutually exclusive electronic control systems for its texttile machines. The investment period is 7 years (equal lives), and the MARR is 12% per year. Data for the systems are given below. Based on the PW method, which alternative should the company select? A. Alternative X OB. Alternative Y Alternative X Y Capital Investment A). The net PW of the alternative X is $13906. (Round to the nearest dollar.) The net PW of the alternative Y is $13208. (Round to the nearest dollar.) Which alternative should the company select? Choose the correct answer below. $8,000 $16,000 A. Alternative Y OB. Alternative X B). What if the MARR was 6%, instead of 12%? The net PW of the alternative X is $15604. (Round to the nearest dollar.) Net Annual Revenues $4,800 $6,400 The net PW of the alternative Y is $15471. (Round to the nearest dollar.) Which alternative should the company select? Choose the correct answer below.
The Mwatex Textile Company is considering two mutually exclusive electronic control systems for its texttile machines. The investment period is 7 years (equal lives), and the MARR is 12% per year. Data for the systems are given below. Based on the PW method, which alternative should the company select? A. Alternative X OB. Alternative Y Alternative X Y Capital Investment A). The net PW of the alternative X is $13906. (Round to the nearest dollar.) The net PW of the alternative Y is $13208. (Round to the nearest dollar.) Which alternative should the company select? Choose the correct answer below. $8,000 $16,000 A. Alternative Y OB. Alternative X B). What if the MARR was 6%, instead of 12%? The net PW of the alternative X is $15604. (Round to the nearest dollar.) Net Annual Revenues $4,800 $6,400 The net PW of the alternative Y is $15471. (Round to the nearest dollar.) Which alternative should the company select? Choose the correct answer below.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Answer part B please
Transcribed Image Text:### Investment Analysis for Textile Industry Control Systems
The Mwatex Textile Company is evaluating two mutually exclusive electronic control systems for its textile machines. The investment period is 7 years, with equal lives for both alternatives. The Minimum Attractive Rate of Return (MARR) is set at 12% per year. Below is the data for the systems:
| Alternative | Capital Investment | Net Annual Revenues |
|-------------|--------------------|---------------------|
| X | $8,000 | $4,800 |
| Y | $16,000 | $6,400 |
Based on the Present Worth (PW) method, the company needs to decide between the alternatives.
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#### A) Analysis with MARR at 12%
- **Net PW of Alternative X**: $13,906 (Rounded to the nearest dollar)
- **Net PW of Alternative Y**: $13,208 (Rounded to the nearest dollar)
**Recommendation**: Select **Alternative X**, as it has a higher net present worth at the given MARR.
---
#### B) Analysis with MARR at 6%
- **Net PW of Alternative X**: $15,604 (Rounded to the nearest dollar)
- **Net PW of Alternative Y**: $15,471 (Rounded to the nearest dollar)
**Recommendation**: Select **Alternative Y**, as it has a higher net present worth under these circumstances.
---
This analysis assists the company in determining the most financially beneficial control system by considering different rates of return.
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