Either a fully automated (FA) or a hand-cranked (H-C) machine maybe purchased to perform the same...
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Either a fully automated (FA) or a hand-cranked (H-C) machine maybe purchased to perform the same set of operations in a factory. The initial purchasing costs for machine FA and machine H-C are $5,000 and $8,000 respectively. The annual maintenance cost of machine H-C is $500; in addition, the cranking mechanism must be replaced at the start of the seventh operating year at a cost of 2,000. The annual maintenance cost of machine FA will start at $800 in year 1 and increase by $100 each year thereafter. The useful lives of the machines FA and H-C are 8 and 12 respectively. When machine H-C is no longer useful, it is junked with no resulting cash inflow. In contrast, the electronic parts in machine FA allow it to be traded in at a salvage value given by the following table. 2 3 4 7 8. Year 1 SV($) 4,500 4,000 3,250 2,500 2,000| 1,600 1,200 1,000 a) Assuming a yearly interest rate is 9.6455% compounded quarterly, compare the machines. b) Repeat your analysis if you believe that the company will be liquidated at the end of 12 years. Either a fully automated (FA) or a hand-cranked (H-C) machine maybe purchased to perform the same set of operations in a factory. The initial purchasing costs for machine FA and machine H-C are $5,000 and $8,000 respectively. The annual maintenance cost of machine H-C is $500; in addition, the cranking mechanism must be replaced at the start of the seventh operating year at a cost of 2,000. The annual maintenance cost of machine FA will start at $800 in year 1 and increase by $100 each year thereafter. The useful lives of the machines FA and H-C are 8 and 12 respectively. When machine H-C is no longer useful, it is junked with no resulting cash inflow. In contrast, the electronic parts in machine FA allow it to be traded in at a salvage value given by the following table. 2 3 4 7 8. Year 1 SV($) 4,500 4,000 3,250 2,500 2,000| 1,600 1,200 1,000 a) Assuming a yearly interest rate is 9.6455% compounded quarterly, compare the machines. b) Repeat your analysis if you believe that the company will be liquidated at the end of 12 years.
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Numerical Methods for Engineers
ISBN: 9780071244299
5th Edition
Authors: Steven C. Chapra, Raymond P. Canale
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