Question

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2. Certain parts for NASA's reusable space exploration vehicle can be either anodized (A) or powder coated (P). Some of the costs for each process are shown in the table below. The incremental cash flow future worth equation associated with (P-A) is 0 = -50,000(F/P,Ai* P-4,5) + 21,000(F/A, Ai* P-A, 5) + 8000 Please provide the answers taking sign conventions into consideration (i.e. cash inflows as positive and cash outflows as negative.) Determine the following: a) The first cost for P b) The M&O for A c) The resale value of P Process Anodized, A Powder coated, P First Cost, $ -30,000 M&O, $/Year -11,000 Resale Value, $ 4,000 Life, Years

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Answer 1

let initial cost of powder coated be Pcost

incremental cost (P-A) = Pcost - (-30000)= Pcost + 30000

from equaiton incremental cost (P-A) = -50000

Pcost + 30000 = -50000

Pcost = -50000 - 30000 = -80000

Let M&O cost of Anodized be A m&o,

incremental M&O cost (P-A) = -11000 - A m&o

from equaiton incremental M&O cost (P-A) = 21000

-11000 - A m&o = 21000

A m&o = -21000-11000 = -32000

Let salvage value of Powder coated be S,

incremental salvage value (P-A) = S - 4000

from equaiton incremental salvage value (P-A) = 8000

S - 4000 = 8000

S = 12000