Required information The Briggs and Stratton Commercial Division designs and manufacturers small engines for golf turf maintenance equipment. A robotics-based testing system with support equipment will ensure that their new signature guarantee program entitled "Always Insta-Start" does indeed work for every engine produced.
Pull System Push System
First cost of equipment $-1,550,000 $-2,250,000
AOC per Year $-720,000 $-600,000
Salvage Value $110,000 $80,000
Estimated Life 8 years 8 years
Determine the salvage value for the push system that will make the company indifferent to the two systems. Also, MARR = 8% per year. The salvage value for the push system is determined to be $ in $1000 units.
Present worth (PW) of Pull System ($) = -1,550,000 - 720,000 x P/A(8%, 8) + 110,000 x P/F(8%, 8)
= -1,550,000 - 720,000 x 5.7466** + 110,000 x 0.5403**
= -1,550,000 - 4,137,552 + 59,433
= -5,628,119
If salvage value of Push system be $S, then for equivalence,
PW of Pull System = PW of Push System
-5,628,119 = -2,250,000 - 600,000 x P/A(8%, 8) + S x P/F(8%, 8)
-3,378,119 = -600,000 x 5.7466** + S x 0.5403**
-3,378,119 = -3,447,960 + S x 0.5403
S x 0.5403 = 69,841
S = $129,263 ~ $130,000 (in $'000)
Required information The Briggs and Stratton Commercial Division designs and manufacturers small engines for golf turf...
The Briggs and Stratton Commercial Division designs and manufacturers small engines for golf turf maintenance equipment. A robotics-based testing system with support equipment will ensure that their new signature guarantee program entitled "Always Insta-Start" does indeed work for every engine produced. Pull System Push System First cost of equipment $-2,000,000 $-2,700,000 AOC per Year $-700,000 $-440,000 Salvage Value $110,000 $70,000 Estimated Life 8 years 8 years Compare the annual worth of the two systems at MARR = 9% per year....