Question

Q5. [20 marks) For this question, X is the first two digits (from the right) of your student ID. an Wolfpack Inc., a textile manufacturing company, is considering opening a production and shipping facility to keep up with demand for its pillows. The facility is expected to require an initial investment of $190,000 and will have a $36,000 salvage value after 5 years. Net annual revenue is estimated to be $100,000 while annual maintenance costs are estimated to be X% of the annual revenue. Determine how sensitive the decision to invest in the new facility is to the estimates of initial cost and annual revenues. Use a MARR of 4% per year and a 5 years study period (If your student ID number is even, use the PW method. Otherwise, use the FW method) ere to search E e

X=72

Answer 1

Annual Revenue annwy In Hors) = $100.000 outflow $190,000 Salvage value (In flow) = $36.000 solution - X = 720) Initial Investment (Inflow) = Annual maintmace (Annal outflows) = = 72.40 of $100,000 =$ 72000 $72,000 f f (1+rj5 ) Netannual Inflows = $100,000 $ 28,000 Using present worth (PW) method As PW= Hot Az f (1+2) (ter)? Ao = $190,000 A, =H2= Az = Ay = $ 28,000 As a $ 18,000 + 3600 = $ 64,000 pw= - 190,020 + (170.0432 (1+0.04)3 (1+0.04) (1-foody 64000 f (150.ou) PW= -35,759.59 since, present worth (PW) is -$35,759 audits comes in negative, therefore the project is not financially viable or no suitable for the Investimet. 2soro 28020 2800 vooo f + + ☆ CS Scanned with CamScanner