Question

Part II (10pts) 10.- Michelin is attempting to determine the economically best model of a curing press for their facilities. The six alternative curing presses models which are feasible are as given in a lable 10.1 Each curing press has a life of 100 years and no salvage value. The company has a total capital budget of $350 000 and a MARR of 15.3%. Which machine should they buy? (10pts) Table 10.1 Model of Curing Press . PLC LTRAV4 PSV DLX Annual Revenue $7,200 25,000 36,000 45,000 50,000 52,000 Investment $60,000 100,000 200,000 220,000 300,000 385,000 12% 25% 18% 20.45% 16.67% 20.50% PLTV AWD

Answer 1

Solution :

Given MARR (Minimum acceptable rate of return) = 15.3 % and budget = $350,000

From the given information,AWD and PLC do not satisfy the MARR criteria of 15.3%. So they are eliminated from the choices.

From the rest of the machines, LTRAV4 has the highest Rate of return = 25% among the rest four machines.

Thus, Michelin should buy LTRAV4.