Question

*"About 1.2 million additional advanced robots are expected to be deployed in the U.S. by 2025, Boston Consulting Group says. Four industries will lead the shift - computer and electronics products; electrical equipment and appliances; transportation; and machinery - largely because more of their tasks can be automated and they deliver the biggest cost savings." (Davidson, Paul. “More robots coming to U.S. factories" USA TODAY, February 9, 2015) The systems (Robot X and Robot Y) shown below are under consideration for an improvement to an automated packaging process. Determine which should be selected on the basis of an Annual Worth Analysis using an interest rate of 10% per year. Robot X Robot Y First cost, $ -350,000 -270,000 Annual cost, $/year -4,000 -3,000 Salvage value, $ 40,000 25,000 Life, years

Answer 1

AW of Robot X = -350000 * (A/P, 10%,3) - 4000 + 40000 * (A/F, 10%,3)

= -350000 * 0.402115 - 4000 + 40000 * 0.302115

= -132655.60

AW of Robot Y = -270000 * (A/P, 10%,2) - 3000 + 25000 * (A/F, 10%,2)

= -270000 * 0.576190 - 3000 + 25000 * 0.476190

= -146666.67

As annual cost of Robot X is less, it should be selected

Second option is correct answer