You have been asked to determine the most fınancially advantageous option for a new Product Packaging machine. It has been determined by the Market Department that product packaging actually makes a difference in the anticipated Yearly Revenue generated by this product and have been provided below The director now wants an annual worth analysis performed on the two final designs based on a shortened project life of only 9 years. Compare the alternatives at the MARR of 10% per year. (all dollar values are in thousands) Packaging Packaging Machine Design Machine Design A B First Cost, $ -900 -1,500 AOC, $ per year -200 -300 Salvage value, S$ (after 7 years of use) Salvage value, S (after 3 years of use) 200 100 Salvage value, $ (after 2 years of use) 20 50 Annual revenue, S per year 800 900 Life, years 3 AW (ŠK per year) for one full life 268.312 312.967 cycle AW for a particle life of 2 years ($K 90.953 -240.476 per year) Assuming that the AW values for Designs A and B provided in the table are correct, which of the following equations presented below will generate the correc AW value for Design B with a nine (9) year period of need?
You have been asked to determine the most fınancially advantageous option for a new Product Packaging machine. It has been determined by the Market Department that product packaging actually makes a difference in the anticipated Yearly Revenue generated by this product and have been provided below The director now wants an annual worth analysis performed on the two final designs based on a shortened project life of only 9 years. Compare the alternatives at the MARR of 10% per year. (all dollar values are in thousands) Packaging Packaging Machine Design Machine Design A B First Cost, $ -900 -1,500 AOC, $ per year -200 -300 Salvage value, S$ (after 7 years of use) Salvage value, S (after 3 years of use) 200 100 Salvage value, $ (after 2 years of use) 20 50 Annual revenue, S per year 800 900 Life, years 3 AW (ŠK per year) for one full life 268.312 312.967 cycle AW for a particle life of 2 years ($K 90.953 -240.476 per year) Assuming that the AW values for Designs A and B provided in the table are correct, which of the following equations presented below will generate the correc AW value for Design B with a nine (9) year period of need?
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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 + (-240.476)(P/A 10,2)(P/F 10,7)]/(A/P 10,9)\)
2. \([(312.967)(P/A 10,7) + (-240.476)(P/A 10,2)(F/P 10,7)]\)
3. \([312.967](P/A 10,7) + (-240.476)(A/P 10,2)(F/P 10,7)]/(A/P 10,9)\)
4. \([(312.967)(P/A 10,7) + (-240.476)(P/A 10,2)]/(A/P 10,9)\)
5. \([312.967 * 7] + [-240.476 * 2])/(A/P 10.9)\)
6. **None of the equations presented will provide the correct value of AW for Design B over a 9-year Period of Need.**
### Explanation
- **P/A, A/P, F/P, P/F**: These are standard financial formulas used to convert between different types of cash flows, such as present value to annual value, or present value to future value.
- The numbers such as 10, 7, 2, 9 pertain to interest rates and periods, indicating how these formulas are adjusted to reflect specific financial scenarios.
- Each equation proposes a method to compute the value of AW (Annual Worth), integrating these formulas with hypothetical financial data (e.g., 312.967 and -240.476).
This setup allows learners to explore how varying parameters](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9c2958c2-088a-4c9f-b425-667be7458fd5%2Faa5b9be0-9fef-4e18-84ef-96173b6b3286%2Feg5i0eg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The image contains a table and several equations related to financial calculations. Below is a detailed description suitable for an educational website:
### Table Overview
The table presents data indexed by numbers ranging from 1 to 100 across various financial parameters. Each entry in the table includes multiple columns of financial figures, representing values like present worth, future worth, and uniform series factors.
### Equations for Financial Calculation
Beneath the table are several proposed equations to determine the correct value of "AW for Design B over a 9-year Period of Need." The equations utilize different financial factors such as present worth (P), future worth (F), annual worth (A), and given interest rates represented in the format (interest, period). Here are the provided options:
1. \([312.967](P/A 10,7) + (-240.476)(P/A 10,2)(P/F 10,7)]/(A/P 10,9)\)
2. \([(312.967)(P/A 10,7) + (-240.476)(P/A 10,2)(F/P 10,7)]\)
3. \([312.967](P/A 10,7) + (-240.476)(A/P 10,2)(F/P 10,7)]/(A/P 10,9)\)
4. \([(312.967)(P/A 10,7) + (-240.476)(P/A 10,2)]/(A/P 10,9)\)
5. \([312.967 * 7] + [-240.476 * 2])/(A/P 10.9)\)
6. **None of the equations presented will provide the correct value of AW for Design B over a 9-year Period of Need.**
### Explanation
- **P/A, A/P, F/P, P/F**: These are standard financial formulas used to convert between different types of cash flows, such as present value to annual value, or present value to future value.
- The numbers such as 10, 7, 2, 9 pertain to interest rates and periods, indicating how these formulas are adjusted to reflect specific financial scenarios.
- Each equation proposes a method to compute the value of AW (Annual Worth), integrating these formulas with hypothetical financial data (e.g., 312.967 and -240.476).
This setup allows learners to explore how varying parameters
Transcribed Image Text:**Title: Analyzing Financial Options for Product Packaging Machine**
**Introduction:**
This section provides an analysis to determine the most financially advantageous option for acquiring a new product packaging machine. The Marketing Department has established that the packaging influences anticipated yearly revenue. Here, we compare two design options based on a shortened project life of 9 years with a Minimum Acceptable Rate of Return (MARR) of 10% per year. All dollar values are in thousands.
**Data Table:**
| **Description** | **Packaging Machine Design A** | **Packaging Machine Design B** |
|------------------------------------------------------|--------------------------------|--------------------------------|
| **First Cost, $** | -900 | -1,500 |
| **Annual Operating Cost (AOC), $ per year** | -200 | -300 |
| **Salvage value, $ (after 7 years of use)** | 0 | 100 |
| **Salvage value, $ (after 3 years of use)** | 100 | 50 |
| **Salvage value, $ (after 2 years of use)** | 20 | 50 |
| **Annual revenue, $ per year** | 800 | 900 |
| **Life, years** | 3 | 7 |
| **Annual Worth (AW) ($K per year) for one full life cycle** | 268.312 | 312.967 |
| **AW for a partial life of 2 years ($K per year)** | 90.953 | -240.176 |
**Analysis:**
We utilize Annual Worth (AW) analysis for decision-making. This method compares the equivalent uniform annual worth of costs and incomes for each option at a 10% interest rate.
**Questions:**
- Calculate the correct Annual Worth value for Design B for a 9-year period.
**Compound Interest Factors Table:**
The table includes the compound interest factors necessary for calculating the present and future value of single payments, capital recovery, and uniform series for different periods (n).
- Interest Rate: 10%
- Factors include Compound Amount Factor, Present Worth Factor, Sinking Fund Factor, Capital Recovery Factor, etc., for varying time periods from 0 to 9 years.
**Conclusion:**
Decision-makers should use the provided data to calculate and determine the optimal financial
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