Whether automated system or the existing labor-intensive system should be preferred to line G.

Question

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Answer 1

Question

Chapter 5, Problem 34P

To determine

To find:Whether automated system or the existing labor-intensive system should be preferred to line G.

Expert Solution & Answer

Answer to Problem 34P

Present worth for labor intensive is less -$432,912than the present worth of automated system which is −$442,464 . Therefore, labor intensive should be preferred.

Explanation of Solution

Given information:

	LaborintensiveSystem	AutomatedSystem
Initial cost	$0	$110,000
Installation cost	$0	$18,500
Firs year O&M cost	$2000	$4800
Annual increase	$450	$950
First year labor cost	$72,000	$47,500
Annual increase	5%	5%
Salvage value (EOY 15)	2500	20,000

Interest rate is 20%

No. of years are 15

Formula used:

Spreadsheet Function to calculate net present worth

NPV(rate,CF1:CFn)

Initial cost+ NPV(rate,CF1:CFn)

NPV − Net present value rate − Interest rate

CF1:CF2 − Cash flow data range without the initial cost

Calculation:

YearLabor intensiveAutomatedO&M costLabor costCash flowO&M costLabor costCash flow0$0−$1285001$2000$7200074000$4800$4750052300224507560078050575049875556253290079380822806700523695906943350833498669976505498762637538008751691316860057737663376425091892961429550606237017374700964871011871050063655741558515010131110646111450668377828795600106377111977124007017982579106050111696117746133507368887038116500117280123780143007737291672126950123144130094152508124196491137400129302136702162008530310150314785013576714361717150895681067181583001425551508551810094047112147

By using the above-mentioned formula, labor intensive system &automated system’spresent Worth is calculated.

Present worth of labor-intensive system

0−432912

Present worth of automated system

−128500−313964

Present worth for labor intensive is −$432912 & for automated system is −$442464 . Labor intensive system cost is less than the automated system, therefore, labor intensive system is more preferred than the automated system.

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Answer 2

Question

Chapter 5, Problem 34P

To determine

To find:Whether automated system or the existing labor-intensive system should be preferred to line G.

Expert Solution & Answer

Answer to Problem 34P

Present worth for labor intensive is less -$432,912than the present worth of automated system which is −$442,464 . Therefore, labor intensive should be preferred.

Explanation of Solution

Given information:

	LaborintensiveSystem	AutomatedSystem
Initial cost	$0	$110,000
Installation cost	$0	$18,500
Firs year O&M cost	$2000	$4800
Annual increase	$450	$950
First year labor cost	$72,000	$47,500
Annual increase	5%	5%
Salvage value (EOY 15)	2500	20,000

Interest rate is 20%

No. of years are 15

Formula used:

Spreadsheet Function to calculate net present worth

NPV(rate,CF1:CFn)

Initial cost+ NPV(rate,CF1:CFn)

NPV − Net present value rate − Interest rate

CF1:CF2 − Cash flow data range without the initial cost

Calculation:

YearLabor intensiveAutomatedO&M costLabor costCash flowO&M costLabor costCash flow0$0−$1285001$2000$7200074000$4800$4750052300224507560078050575049875556253290079380822806700523695906943350833498669976505498762637538008751691316860057737663376425091892961429550606237017374700964871011871050063655741558515010131110646111450668377828795600106377111977124007017982579106050111696117746133507368887038116500117280123780143007737291672126950123144130094152508124196491137400129302136702162008530310150314785013576714361717150895681067181583001425551508551810094047112147

By using the above-mentioned formula, labor intensive system &automated system’spresent Worth is calculated.

Present worth of labor-intensive system

0−432912

Present worth of automated system

−128500−313964

Present worth for labor intensive is −$432912 & for automated system is −$442464 . Labor intensive system cost is less than the automated system, therefore, labor intensive system is more preferred than the automated system.

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Answer 3

Question

Chapter 5, Problem 34P

To determine

To find:Whether automated system or the existing labor-intensive system should be preferred to line G.

Expert Solution & Answer

Answer to Problem 34P

Present worth for labor intensive is less -$432,912than the present worth of automated system which is −$442,464 . Therefore, labor intensive should be preferred.

Explanation of Solution

Given information:

	LaborintensiveSystem	AutomatedSystem
Initial cost	$0	$110,000
Installation cost	$0	$18,500
Firs year O&M cost	$2000	$4800
Annual increase	$450	$950
First year labor cost	$72,000	$47,500
Annual increase	5%	5%
Salvage value (EOY 15)	2500	20,000

Interest rate is 20%

No. of years are 15

Formula used:

Spreadsheet Function to calculate net present worth

NPV(rate,CF1:CFn)

Initial cost+ NPV(rate,CF1:CFn)

NPV − Net present value rate − Interest rate

CF1:CF2 − Cash flow data range without the initial cost

Calculation:

YearLabor intensiveAutomatedO&M costLabor costCash flowO&M costLabor costCash flow0$0−$1285001$2000$7200074000$4800$4750052300224507560078050575049875556253290079380822806700523695906943350833498669976505498762637538008751691316860057737663376425091892961429550606237017374700964871011871050063655741558515010131110646111450668377828795600106377111977124007017982579106050111696117746133507368887038116500117280123780143007737291672126950123144130094152508124196491137400129302136702162008530310150314785013576714361717150895681067181583001425551508551810094047112147

By using the above-mentioned formula, labor intensive system &automated system’spresent Worth is calculated.

Present worth of labor-intensive system

0−432912

Present worth of automated system

−128500−313964

Present worth for labor intensive is −$432912 & for automated system is −$442464 . Labor intensive system cost is less than the automated system, therefore, labor intensive system is more preferred than the automated system.

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Answer 4

Question

Chapter 5, Problem 34P

To determine

To find:Whether automated system or the existing labor-intensive system should be preferred to line G.

Expert Solution & Answer

Answer to Problem 34P

Present worth for labor intensive is less -$432,912than the present worth of automated system which is −$442,464 . Therefore, labor intensive should be preferred.

Explanation of Solution

Given information:

	LaborintensiveSystem	AutomatedSystem
Initial cost	$0	$110,000
Installation cost	$0	$18,500
Firs year O&M cost	$2000	$4800
Annual increase	$450	$950
First year labor cost	$72,000	$47,500
Annual increase	5%	5%
Salvage value (EOY 15)	2500	20,000

Interest rate is 20%

No. of years are 15

Formula used:

Spreadsheet Function to calculate net present worth

NPV(rate,CF1:CFn)

Initial cost+ NPV(rate,CF1:CFn)

NPV − Net present value rate − Interest rate

CF1:CF2 − Cash flow data range without the initial cost

Calculation:

YearLabor intensiveAutomatedO&M costLabor costCash flowO&M costLabor costCash flow0$0−$1285001$2000$7200074000$4800$4750052300224507560078050575049875556253290079380822806700523695906943350833498669976505498762637538008751691316860057737663376425091892961429550606237017374700964871011871050063655741558515010131110646111450668377828795600106377111977124007017982579106050111696117746133507368887038116500117280123780143007737291672126950123144130094152508124196491137400129302136702162008530310150314785013576714361717150895681067181583001425551508551810094047112147

By using the above-mentioned formula, labor intensive system &automated system’spresent Worth is calculated.

Present worth of labor-intensive system

0−432912

Present worth of automated system

−128500−313964

Present worth for labor intensive is −$432912 & for automated system is −$442464 . Labor intensive system cost is less than the automated system, therefore, labor intensive system is more preferred than the automated system.

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Answer 5

Chapter 5, Problem 34P

To determine

To find:Whether automated system or the existing labor-intensive system should be preferred to line G.

Expert Solution & Answer

Answer to Problem 34P

Present worth for labor intensive is less -$432,912than the present worth of automated system which is −$442,464 . Therefore, labor intensive should be preferred.

Explanation of Solution

Given information:

	LaborintensiveSystem	AutomatedSystem
Initial cost	$0	$110,000
Installation cost	$0	$18,500
Firs year O&M cost	$2000	$4800
Annual increase	$450	$950
First year labor cost	$72,000	$47,500
Annual increase	5%	5%
Salvage value (EOY 15)	2500	20,000

Interest rate is 20%

No. of years are 15

Formula used:

Spreadsheet Function to calculate net present worth

NPV(rate,CF1:CFn)

Initial cost+ NPV(rate,CF1:CFn)

NPV − Net present value rate − Interest rate

CF1:CF2 − Cash flow data range without the initial cost

Calculation:

YearLabor intensiveAutomatedO&M costLabor costCash flowO&M costLabor costCash flow0$0−$1285001$2000$7200074000$4800$4750052300224507560078050575049875556253290079380822806700523695906943350833498669976505498762637538008751691316860057737663376425091892961429550606237017374700964871011871050063655741558515010131110646111450668377828795600106377111977124007017982579106050111696117746133507368887038116500117280123780143007737291672126950123144130094152508124196491137400129302136702162008530310150314785013576714361717150895681067181583001425551508551810094047112147

By using the above-mentioned formula, labor intensive system &automated system’spresent Worth is calculated.

Present worth of labor-intensive system

0−432912

Present worth of automated system

−128500−313964

Present worth for labor intensive is −$432912 & for automated system is −$442464 . Labor intensive system cost is less than the automated system, therefore, labor intensive system is more preferred than the automated system.

Answer 6

Chapter 5, Problem 34P

To determine

To find:Whether automated system or the existing labor-intensive system should be preferred to line G.

Expert Solution & Answer

Answer to Problem 34P

Present worth for labor intensive is less -$432,912than the present worth of automated system which is −$442,464 . Therefore, labor intensive should be preferred.

Explanation of Solution

Given information:

	LaborintensiveSystem	AutomatedSystem
Initial cost	$0	$110,000
Installation cost	$0	$18,500
Firs year O&M cost	$2000	$4800
Annual increase	$450	$950
First year labor cost	$72,000	$47,500
Annual increase	5%	5%
Salvage value (EOY 15)	2500	20,000

Interest rate is 20%

No. of years are 15

Formula used:

Spreadsheet Function to calculate net present worth

NPV(rate,CF1:CFn)

Initial cost+ NPV(rate,CF1:CFn)

NPV − Net present value rate − Interest rate

CF1:CF2 − Cash flow data range without the initial cost

Calculation:

YearLabor intensiveAutomatedO&M costLabor costCash flowO&M costLabor costCash flow0$0−$1285001$2000$7200074000$4800$4750052300224507560078050575049875556253290079380822806700523695906943350833498669976505498762637538008751691316860057737663376425091892961429550606237017374700964871011871050063655741558515010131110646111450668377828795600106377111977124007017982579106050111696117746133507368887038116500117280123780143007737291672126950123144130094152508124196491137400129302136702162008530310150314785013576714361717150895681067181583001425551508551810094047112147

By using the above-mentioned formula, labor intensive system &automated system’spresent Worth is calculated.

Present worth of labor-intensive system

0−432912

Present worth of automated system

−128500−313964

Present worth for labor intensive is −$432912 & for automated system is −$442464 . Labor intensive system cost is less than the automated system, therefore, labor intensive system is more preferred than the automated system.

Answer 7

Chapter 5, Problem 34P

To determine

To find:Whether automated system or the existing labor-intensive system should be preferred to line G.

Answer 8

Expert Solution & Answer

Answer to Problem 34P

Present worth for labor intensive is less -$432,912than the present worth of automated system which is −$442,464 . Therefore, labor intensive should be preferred.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Given information:

	LaborintensiveSystem	AutomatedSystem
Initial cost	$0	$110,000
Installation cost	$0	$18,500
Firs year O&M cost	$2000	$4800
Annual increase	$450	$950
First year labor cost	$72,000	$47,500
Annual increase	5%	5%
Salvage value (EOY 15)	2500	20,000

Interest rate is 20%

No. of years are 15

Formula used:

Spreadsheet Function to calculate net present worth

NPV(rate,CF1:CFn)

Initial cost+ NPV(rate,CF1:CFn)

NPV − Net present value rate − Interest rate

CF1:CF2 − Cash flow data range without the initial cost

Calculation:

YearLabor intensiveAutomatedO&M costLabor costCash flowO&M costLabor costCash flow0$0−$1285001$2000$7200074000$4800$4750052300224507560078050575049875556253290079380822806700523695906943350833498669976505498762637538008751691316860057737663376425091892961429550606237017374700964871011871050063655741558515010131110646111450668377828795600106377111977124007017982579106050111696117746133507368887038116500117280123780143007737291672126950123144130094152508124196491137400129302136702162008530310150314785013576714361717150895681067181583001425551508551810094047112147

By using the above-mentioned formula, labor intensive system &automated system’spresent Worth is calculated.

Present worth of labor-intensive system

0−432912

Present worth of automated system

−128500−313964

Present worth for labor intensive is −$432912 & for automated system is −$442464 . Labor intensive system cost is less than the automated system, therefore, labor intensive system is more preferred than the automated system.

Answer 12

Ch. 5 - Prob. 1QTC Ch. 5 - Prob. 2QTC Ch. 5 - Prob. 3QTC Ch. 5 - Prob. 1P Ch. 5 - Prob. 2P Ch. 5 - Prob. 3P Ch. 5 - Prob. 4P Ch. 5 - Prob. 5P Ch. 5 - Prob. 6P Ch. 5 - Prob. 7P

Whether automated system or the existing labor-intensive system should be preferred to line G.

To find:Whether automated system or the existing labor-intensive system should be preferred to line G.

Answer to Problem 34P

Explanation of Solution

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Chapter 5 Solutions