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Using the below details, answer the following questions. Use interest rate = 10% (must show your work): Machine Initial Cost, $ AOC, $/Year Annual Revenue, $ / year Salvage Value Life, Years X -146,000 -15,000 80,000 10,000 3 Y -220000 -10,000 75,000 25,000 6 a. In comparing the alternatives on a present worth basis, determine the PW for both machine X and Y. Using your answer, which alternative would you select? c. Determine the capitalized cost of both machine X and Y b. In comparing the alternatives on a future worth basis, determine the FW for both machine X and Y. Using your answer, which alternative would you select?

Using the below details, answer the following questions. Use interest rate = 10% (must show your work): Machine Initial Cost, $ AOC, $/Year Annual Revenue, $ / year Salvage Value Life, Years X -146,000 -15,000 80,000 10,000 3 Y -220000 -10,000 75,000 25,000 6 a. In comparing the alternatives on a present worth basis, determine the PW for both machine X and Y. Using your answer, which alternative would you select? c. Determine the capitalized cost of both machine X and Y b. In comparing the alternatives on a future worth basis, determine the FW for both machine X and Y. Using your answer, which alternative would you select?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### Evaluating Machine Investments: An Educational Analysis #### Given Details: To evaluate the potential investment in machines X and Y, consider the following financial data. Assume an interest rate of 10%. | Machine | X | Y | |---------|---------|---------| | Initial Cost, $ | -146,000 | -220,000 | | AOC, $/Year | -15,000 | -10,000 | | Annual Revenue, $/Year | 80,000 | 75,000 | | Salvage Value | 10,000 | 25,000 | | Life, Years | 3 | 6 | --- #### Questions: **a. Present Worth Analysis:** Calculate the Present Worth (PW) for both Machine X and Y. Determine which machine is the better investment option based on this analysis. **b. Future Worth Analysis:** Calculate the Future Worth (FW) for both Machine X and Y. Decide which machine to select based on these calculations. **c. Capitalized Cost:** Determine the capitalized cost for both machines X and Y. --- #### Instructions: Researchers and financial analysts are encouraged to show detailed work for the calculations, considering depreciation, operational costs, salvage value, and revenue across the lifespan of the machinery. This analysis provides insight into the financial viability and long-term benefits of each machine, assisting in strategic investment decisions.
Transcribed Image Text:### Evaluating Machine Investments: An Educational Analysis #### Given Details: To evaluate the potential investment in machines X and Y, consider the following financial data. Assume an interest rate of 10%. | Machine | X | Y | |---------|---------|---------| | Initial Cost, $ | -146,000 | -220,000 | | AOC, $/Year | -15,000 | -10,000 | | Annual Revenue, $/Year | 80,000 | 75,000 | | Salvage Value | 10,000 | 25,000 | | Life, Years | 3 | 6 | --- #### Questions: **a. Present Worth Analysis:** Calculate the Present Worth (PW) for both Machine X and Y. Determine which machine is the better investment option based on this analysis. **b. Future Worth Analysis:** Calculate the Future Worth (FW) for both Machine X and Y. Decide which machine to select based on these calculations. **c. Capitalized Cost:** Determine the capitalized cost for both machines X and Y. --- #### Instructions: Researchers and financial analysts are encouraged to show detailed work for the calculations, considering depreciation, operational costs, salvage value, and revenue across the lifespan of the machinery. This analysis provides insight into the financial viability and long-term benefits of each machine, assisting in strategic investment decisions.
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