RTC Manufacturing is a sheet metal fabrication company in southern Ontario. The company is choosing between...

 

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RTC Manufacturing is a sheet metal fabrication company in southern Ontario. The company is choosing between two sheet metal cutting machines; CNC plasma and CNC laser. MARR (Minimum Acceptable Rate of Return) for RTC Manufacturing is 9%. Answer the following questions using the information in the table below. Down payment Annual payment Maintenance cost Operating cost per year Salvage Value Service Life CNC plasma $90,000 $1,400 $1,200 for the first year, increasing by 5% per year thereafter $6,300 20,000 15 years CNC laser $140,000 $1,900 $800 for the first year, increasing by 4% year thereafter $4,100 50,000 20 years (4 Marks) (6 Marks) (6 Marka) What is the assumption made to compare mutually exclusive alternatives of different lives? b) Using Annual Worth comparison, which cutting machines should be selected? Y Using Present Worth comparison, which cutting machines should be selected? dy Do both methods (Present Worth and Annual Worth) always yield to the same decision? For a fifteen-year study period, what salvage value for the CNC laser would make it a better choice? (3 Marks) (6 Marks) RTC Manufacturing is a sheet metal fabrication company in southern Ontario. The company is choosing between two sheet metal cutting machines; CNC plasma and CNC laser. MARR (Minimum Acceptable Rate of Return) for RTC Manufacturing is 9%. Answer the following questions using the information in the table below. Down payment Annual payment Maintenance cost Operating cost per year Salvage Value Service Life CNC plasma $90,000 $1,400 $1,200 for the first year, increasing by 5% per year thereafter $6,300 20,000 15 years CNC laser $140,000 $1,900 $800 for the first year, increasing by 4% year thereafter $4,100 50,000 20 years (4 Marks) (6 Marks) (6 Marka) What is the assumption made to compare mutually exclusive alternatives of different lives? b) Using Annual Worth comparison, which cutting machines should be selected? Y Using Present Worth comparison, which cutting machines should be selected? dy Do both methods (Present Worth and Annual Worth) always yield to the same decision? For a fifteen-year study period, what salvage value for the CNC laser would make it a better choice? (3 Marks) (6 Marks)

Answer rating: 100% (QA)

a The assumption is that they can be repeated any number of times with the same investment and benefit cash flows for each such repetition The alterna... View the full answer