Two years ago, Toshiba Electronics made a $15 million investment in newassembly line machinery. It purchased approximately 200 units at $70,000 each and placed them in plants in 10 different countries. The equipment sorts, tests, and performs insertion-order kitting on electronic components in preparation for special-purpose printed circuit boards. A new international industry standard requires a $16,000 additional cost next year (year 1 of retention) on each unit in addition to the expected operating cost. Due to the new standards, coupled with rapidly changing technology, a new system is challenging these 2-year-old machines. The chief engineer at Toshiba USA has asked that a replacement study be performed this year and each year in the future, if need be. At i = 10% and with the estimates below, do the following:a. Determine the AW values and economic service lives necessary to perform the replacement study. Challenger: First cost: $50,000 Future market values: decreasing by 20% per year Estimated retention period: no more than 5 years AOC estimates: $5000 in year 1 with increases of $2000 per year thereafter Defender: Current international market value: $15,000Future market values: decreasing by 20% per year Estimated retention period: no more than 3 more years AOC estimates: $4000 next year, increasing by $4000 per year thereafter, plus the extra $16,000 next yearb. Perform the replacement study now.c. After 1 year, it is time to perform the follow-up analysis. The challenger ismaking large inroads into the market for electronic components assemblyequipment, especially with the new international standards features built in.The expected market value for the defender is still $12,000 this year, but itis expected to drop to virtually nothing in the future—$2000 next year onthe worldwide market and zero after that. Also, this prematurely outdatedequipment is more costly to keep serviced, so the estimated AOC next yearhas been increased from $8000 to $12,000 and to $16,000 two years out.Perform the follow-up replacement study analysis.
Two years ago, Toshiba Electronics made a $15 million investment in new
assembly line machinery. It purchased approximately 200 units at $70,000 each and placed them in plants in 10 different countries. The equipment sorts, tests, and performs insertion-order kitting on electronic components in preparation for special-purpose printed circuit boards. A new international industry standard requires a $16,000 additional cost next year (year 1 of retention) on each unit in addition to the expected operating cost. Due to the new standards, coupled with rapidly changing technology, a new system is challenging these 2-year-old machines. The chief engineer at Toshiba USA has asked that a replacement study be performed this year and each year in the future, if need be. At i = 10% and with the estimates below, do the following:
a. Determine the AW values and economic service lives necessary to perform the replacement study. Challenger: First cost: $50,000 Future market values: decreasing by 20% per year Estimated retention period: no more than 5 years AOC estimates: $5000 in year 1 with increases of $2000 per year thereafter Defender: Current international market value: $15,000
Future market values: decreasing by 20% per year Estimated retention period: no more than 3 more years AOC estimates: $4000 next year, increasing by $4000 per year thereafter, plus the extra $16,000 next year
b. Perform the replacement study now.
c. After 1 year, it is time to perform the follow-up analysis. The challenger is
making large inroads into the market for electronic components assembly
equipment, especially with the new international standards features built in.
The expected market value for the defender is still $12,000 this year, but it
is expected to drop to virtually nothing in the future—$2000 next year on
the worldwide market and zero after that. Also, this prematurely outdated
equipment is more costly to keep serviced, so the estimated AOC next year
has been increased from $8000 to $12,000 and to $16,000 two years out.
Perform the follow-up replacement study analysis.
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