Question

17:16 al ( + New question Post * Select Subject (required) The two machines detailed are being considered for a chip manufacturing operation. Assume the company's Marr is 12% per year compounded semi-annually. Which machine should be selected on the basis of an annual worth analysis? machine a mach b first cost -150k -1000.000 semi annual C-70k -5 k salvage value 40k 200k 81 life year 4 10 Add photo

immediately please

immediately

Answer 1

Solution :-

Semiannual Interest Rate = 12% / 2 = 6%

Now Annual Worth = [ - Initial Cost - Semiannual Cost * PVAF ( r , n ) + Salvage Value * PVF ( r , n ) ]

In Case of Machine A =

Semiannual Period ( n ) = 4 * 2 = 8

Now

Semi Annual Worth = [ - $150,000 - $70,000 * PVAF ( 6% , 8 ) + $40,000 * PVF( 6% , 8 ) ] * A/P ( 6% , 8 )

= [ -$150,000 - ( $70,000 * 6.2079 ) + ( $40,000 * 0.6274 ) ] * 0.161

= - $90,113.95

In case of Machine B =

Semi annual Period (n) = 8 * 2 = 16

Now

Semi Annual Worth = [ - $1,000,000 - $5,000 * PVAF ( 6% , 16 ) + $200,000 * PVF( 6% , 16 ) ] * A/P ( 6% , 16 )

= [ -$1,000,000 - ( $5,000 * 10.1059 ) + ( $200,000 * 0.3936 ) ] * 0.0989

= - $96,161.72

Choose Machine A as it has Low semiannual worth as Compared to Machine B

And Costs are lower the Better

If there is any doubt please ask in comments

Thank you please rate