Two alternatives can be used to solve a repeatedly valve failure problem. A) Use new valves from company A with the initial cost of $10000, and every year needs to pay $1500 for maintenance up to 5 years. B) Hire an equipment company to repair the system. Initial cost is $20000 and every year needs maintenance cost of $1200 up to 5 years. Use NPW method to compare which method is better at i=10%.
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- You are building a new facility and are trying to determine which vendor you are going to use to install new windows. You get quotes from two vendors-Vendor A and Vendor B. The useful life of the windows is 9.1 years and the MARR is 14%. The annual worth from the quotes are given below. What should you do? Vendor A B AW Save for Later -$6300 -$3200 O Purchase windows from Vendor B. O Purchase windows from Vendor A O Do nothing. Attempts: 0 of 1 used SandWhat is the simple payback on this improvement? (Ignore Discount Rate) A silicon wafer manufacturing process has a potential improvement but the total cost of the system improvement over the expected remaining service life of 5 years is unknown. The initial cost of the improvement is $7,000 and the annual maintenance cost of the improvement is $650 with a discount rate of 8%. 1. What is the total cost of the machine improvement at the present time? 2. The process improvement is expected to generate a cost savings of about $3000 per year. What is the total cost savings of the improvement at the present time?Company C is seeking for help to decide this option to choose to upgrade their current bottleneck equipment. There are two vendors and one rental option. The cost details are shown in the table below. Vender R 75000 28000 Option Initial Cost Annual Operation Cost Salvage Value 0 Estimated Life in Year 2 MARR = 10% per year compounded monthly. Vender T 125000 12000 30000 3 Rental 0 52000 0 Maximum 3 years 1. Select from the two sales vendors using the LCM and PW analysis. 2. Determine which of the three options is cheaper over a 3 year study period.
- Two pumps are being considered to replace an old one. The details of the two pumps are shown below. If the MARR is 15%, which pump do you recommend buying if the repeatability assumption applies? Pump A Investment (RO) Pump B 2,200 3,000 Annual Maintenance 210 315 (RO/year) Power consumption (RO/year) Salvage Value (RO) Life time (year) 1,100 1,200 350 150 6.Your boss has told you to evaluate the cost of two machines.After some questioning, you are assured that they have thecosts shown at the right. Assume:a) The life of each machine is 3 years.b) The company thinks it knows how to make 14% oninvestments no riskier than this one.Determine via the present value method which machine topurchase. MACHINE A MACHINE BOriginal cost $13,000 $20,000Labor cost per year 2,000 3,000Floor space per year 500 600Energy (electricity) per year 1,000 900Maintenance per year 2,500 500Total annual cost $ 6,000 $ 5,000Salvage value $ 2,000 $ 7,000A warehouse manager is evaluating 2 different robotic systems to be installed in his warehouse. Using the present worth analysis, determine which is the economically better system if MARR is 12% per year compounded monthly. Justify your answer. System A System B - 40,000 -60,000 - 5,000 Initial cost, RM Maintenance cost, RM per month Semi-annual maintenance cost, RM per 6-month Salvage value after 5 years, RM - 13,000 8,000 10,000
- An auto repair company needs a new machine that will check for defective sensors. The machine has an Initial investment of $224,000. Incremental revenues, including cost savings, are $120,000, and Incremental expenses, including depreciation, are $50,000. There is no salvage value. What is the accounting rate of return (ARR)?Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1.200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows: A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer? B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer? C. What would be your recommendation to Shonda & Shonda regarding this purchase?7.5 Consider a machine that costs $5000 to replace and its maintenance cost is $500 per year. The expected failure time of the machine is five years. (a) Find the optimal time to replace the machine. (b) Generate multicriteria alternatives for times t = 2, 3, 4, 5, 6 years. %3D (c) Rank the alternatives generated in part (a) using an additive utility function, where the weights of importance for the two normalized objectives are 0.7 and 0.3. respectively.
- Your company is planning to add a piece of equipment with 7 years of expected life for its production line. There will be no salvage value at the end of its life. The company has set its MARR to 11%. Your manager asks you to use incremental analysis to evaluate the alternatives and let him know which one of them should be chosen. Below is the data provided to you with the investment cost, annual income and IRR for each of the five alternatives. A B C D E Capital investment $14,000 $16,000 $16,500 $17,200 $20,000 Net annual income $3,000 $3,500 $3,700 $3,750 $4,300 IRR 11.30% 11.95% 12.73% 11.84% 11.41%1. Prepare a differential anaysis comparing present machine (Alt. 1) to new machine (Alt. 2). Analysis should indicate total differential income over the six-year period if the new machine is purchased. 2. Which Alternative would you propose? What other factors should be considered? 3. What if you could invest the funds required to purchase the new equipment (cost less proceeds from sale of old machine) at 4% per year. Does this change your viewpoint? What does this indicate of the limitations of this method for evaluating an investment proposal?A manufacturer of automated optical inspection devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the internal rate of return (IRR) method to determine which alternative should be selected if the analysis period is 8 years and the company's MARR is 4% per year. Alternative M N Initial costs $30,000 $45,000 Net annual cash flow $4,500 $7,000 Life in years 8 8 (a) IRR of base alternative = (b) IRR of incremental cash flow = (c) Choose Alternative