Practical Management Science
Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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8.35 Emerson Electric is considering the purchase of equipment that will allow
the company to manufacture a new line of wireless devices for home appliance
control. The first cost will be $80,000 and the life estimated is 6 years with a
salvage value of $10,000. Three different salespeople have provided estimates
regarding the added revenue the equipment will generate. Salespersons 1,2,
and 3 have made estimates of $10,000, $16,000, and $18,000 per year,
respectively. If the company's MARR is 8% per year, use a PW=based relation
to perform a sensitivity analysis to assist in the decision to purchase the
equipment. This question is in four parts.
Part 4: Based on the results of the sensitivity analysis using three different
salespeople's estimate of added revenue, what can you conclude about this
purchase?
The decision to purchase the equipment is sensitive to revenue estimates.
Recommend the purchase of the equipment..
Do not recommend the purchase of the equipment..
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Transcribed Image Text:8.35 Emerson Electric is considering the purchase of equipment that will allow the company to manufacture a new line of wireless devices for home appliance control. The first cost will be $80,000 and the life estimated is 6 years with a salvage value of $10,000. Three different salespeople have provided estimates regarding the added revenue the equipment will generate. Salespersons 1,2, and 3 have made estimates of $10,000, $16,000, and $18,000 per year, respectively. If the company's MARR is 8% per year, use a PW=based relation to perform a sensitivity analysis to assist in the decision to purchase the equipment. This question is in four parts. Part 4: Based on the results of the sensitivity analysis using three different salespeople's estimate of added revenue, what can you conclude about this purchase? The decision to purchase the equipment is sensitive to revenue estimates. Recommend the purchase of the equipment.. Do not recommend the purchase of the equipment..
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