A construction company is evaluating the purchase of a new concrete mixer with hydraulic hopper and automatic controller. The mixer will have a first cost of BD 12,000, a life of 9 years, and no salvage value. It will require 2 operators at a cost of BD 4.500 per hour each. A total of one cubic meter of concrete can be poured each hour by the mixer. Alternatively, if human labor is used, 5 workers, each earning BD 4 per hour, are required to one cubic meter per hour. The estimated cost of the material is BD 21 per cubic meter and the MARR is 7% per year (clearly show the S.N., numeric answer, and final decision). a) Determine the minimum cubic meters per year to justify the purchase of the automatic mixer. b) The company expects to produce 140 cubic meters per year, which option should they select? Why?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A construction company is evaluating the purchase of a new concrete mixer with hydraulic hopper and automatic controller. The
mixer will have a first cost of BD 12,000, a life of 9 years, and no salvage value. It will require 2 operators at a cost of BD 4.500 per
hour each. A total of one cubic meter of concrete can be poured each hour by the mixer. Alternatively, if human labor is used, 5
workers, each earning BD 4 per hour, are required to one cubic meter per hour. The estimated cost of the material is BD 21 per cubic
meter and the MARR is 7% per year (clearly show the S.N., numeric answer, and final decision).
a) Determine the minimum cubic meters per year to justify the purchase of the automatic mixer.
b) The company expects to produce 140 cubic meters per year, which option should they select? Why?
Transcribed Image Text:A construction company is evaluating the purchase of a new concrete mixer with hydraulic hopper and automatic controller. The mixer will have a first cost of BD 12,000, a life of 9 years, and no salvage value. It will require 2 operators at a cost of BD 4.500 per hour each. A total of one cubic meter of concrete can be poured each hour by the mixer. Alternatively, if human labor is used, 5 workers, each earning BD 4 per hour, are required to one cubic meter per hour. The estimated cost of the material is BD 21 per cubic meter and the MARR is 7% per year (clearly show the S.N., numeric answer, and final decision). a) Determine the minimum cubic meters per year to justify the purchase of the automatic mixer. b) The company expects to produce 140 cubic meters per year, which option should they select? Why?
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