Question

Ismael Nofal كان نشظا منذ 48 دقيقة 4 125 points Machines that have the following costs are de conside r production process. Using an interest te of 10p er determine which be selected on the basis of an equivalent uniforme s is First Cost, $ Annual Operating Cost, Slyear Machine A - 15000 -1500 -400 for year and increasing by S50 per year 3000 Salvage Value Life, year المزيد تعديل

Answer 1

Machine A

Equivalent uniform annual worth = Capital recovery cost + Annual operating cost

Capital recovery cost = - First cost $\times$ Capital recovery factor + Salvage value $\times$ Sinking fund factor

Capital recovery cost machine A = - 15,000 $\times$ (A/P, 10%, 2 years ) + 3000 $\times$ (A/F, 10% , 2 years)

Capital recovery cost machine A = - 15,000 $\times$ 0.5762 + $ 3000 $\times$ 0.4762 = - 7214.4

Equivalent uniform annual worth =  - 7214.4 - 1500

Equivalent uniform annual worth machine A = $ - 8,714.4

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Machine B

Equivalent uniform annual worth = Capital recovery cost + Annual operating cost

Capital recovery cost machine B = - 25,000 $\times$ (A/P, 10%, 10 years ) + 6000 $\times$ (A/F, 10% , 10 years)

Capital recovery cost machine B = - 25000 $\times$ 0.1627 + 6000 $\times$ 0.0627

Capital recovery cost machine B = - 3691.3

Equivalent uniform annual worth = - 3691.3 - 400 - 50 $\times$ ( P/A, 10% , 10 years)

( P/A, 10% , 10 years) = Uniform series present worth

Equivalent uniform annual worth machine B = - 3691.3 - 400 - 50 $\times$   6.145

Equivalent uniform annual worth machine B = $- 4398.6

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Thus machine B must be selected because it has a lower equivalent uniform annual worth of cost when compared to machine A.