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. Select the better system.
The (Click to select) push system pull system is determined to be the better system.
Given,
MARR = 9% per year
Pull System:
First cost of equipment = -$2,000,000
From the compound interest table, we obtain (A/P, 9%, 8) = 0.1807
The annual worth of the first cost = -$2,000,000 x (A/P, 9%, 8) = -$2,000,000 x 0.1807 = -$361,400
Salvage value at the end of 8 years = $110,000
From the compound interest table, we btain (A/F, 9%, 8) = 0.0907
The annual worth of the salvage value = $110,000 x (A/F, 9%, 8) = $110,000 x 0.0907 = $9,977
Annual Operating Costs = -$700,000
Total annual worth of the pull system = AW of the first cost + AOC + AW of the Salvage Value = -$361,400 - $700,000 + $9,977 = -$1,051,423
Push System:
First cost of equipment = -$2,700,000
From the compound interest table, we obtain (A/P, 9%, 8) = 0.1807
The annual worth of the first cost = -$2,700,000 x (A/P, 9%, 8) = -$2,700,000 x 0.1807 = -$487,890
Salvage value at the end of 8 years = $70,000
From the compound interest table, we btain (A/F, 9%, 8) = 0.0907
The annual worth of the salvage value = $70,000 x (A/F, 9%, 8) = $70,000 x 0.0907 = $6,349
Annual Operating Costs = -$440,000
Total annual worth of the pull system = AW of the first cost + AOC + AW of the Salvage Value = -487,890 - $440,000 + $6,349 = -$921,541
The annual worth of the pull system is less than that of push system (Or, alternately, it can be said that the cost incurred is lower for push system) . Therefore, push system is the better one.
The Briggs and Stratton Commercial Division designs and manufacturers small engines for golf turf maintenance equipment....
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...