Question

TASTE 25 BB ALE 2) Akash Uni-Safe in Chennai, India, makes Terminater fire extinguishers. It needs replacement equipment to form the neck at the top of each extinguisher during production. Select between two metal-constricting systems. Use the corporate MARR of 15% per year with (a) present worth analysis, and (b) future worth analysis. Machine D Machine E First cost. S -62.000 –77.000 Annual operating cost. S per year - 15.000 -21.000 Salvage value. S 8.000 10.000 Life. years

Answer 1

The analysis will be for 12 yrs (LCM of 4 & 6)

a.

PW of Machine D = -62000 - 15000 * (P/A, 15%,12) - (62000 - 8000)*(P/F, 15%,4) - (62000 - 8000)*(P/F, 15%,8) + 8000 * (P/F, 15%,12)

= -62000 - 15000 * 5.420619 - 54000*0.571753 - 54000*0.326902 + 8000 * 0.186907

= -190341.40

PW of Machine E = -77000 - 21000 * (P/A, 15%,12) - (77000 - 10000)*(P/F, 15%,6) + 10000 * (P/F, 15%,12)

= -77000 - 21000 * 5.420619 - 67000*0.432328 + 10000 * 0.186907

= -217929.90

As the present cost of D is less, it should be selected

b.

FW of D = -190341.40 * (F/P,15%,12) = -190341.40 * 5.350250 = -1018374.09

FW of E = -217929.90 * (F/P,15%,12) = -217929.90 * 5.350250 =-1165979.47

As future cost of D is less, it should be selected