Three models of baseball bats will be manufactured in a new plant in Pulaski. Each bat requires
Question:
The plant will operate 3,000 hours per year. Machine availability is 85% for Lathe 1 and 90% for Lathe 2. Scrap rates for the two lathes are 5% versus 10% for L1 and L2, respectively. Cash flows and expected lives for the two lathes are given in the adjacent table.
Annual operating expenses are based on an assumed operation of 3,000 hours per year, and workers are paid during any idle time of L1 and L2. Upper management has decided that MARR = 18% per year.
a. How many type L1 lathes will be required to meet the machine-hour requirement?
b. What is the CR cost of the required type L2 lathes?
c. What is the annual operating expense of the type L2 lathes?
d. Which type of lathe should be selected on the basis of lowest total equivalent annual cost?
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
Step by Step Answer:
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling