Jensen Systems purchases several parts for the instruments it makes via a fixed-price contract of $155,000 per year from a local supplier. The new president of Jensen wants to make the parts inhouse through the purchase of equipment that will have a first cost of $240,000 with an estimated salvage value of $30,000 after 5 years. The AOC is difficult to estimate, but company engineers have made optimistic, most likely, and pessimistic estimates of $70,000, $85,000, and $120,000 per year, respectively. Determine if the company should purchase the equipment under any of the operating cost scenarios. The MARR is 20% per year.

Required information A land development company is considering the purchase of earth-moving equipment. This equipment will have an estimated first cost of $214,000, a salvage value of $90,000, a life of 10 years, a maintenance cost of $42,000 per year, and an operating cost of $320 per day. Alternatively, the company can rent the necessary equipment for $1180 per day and hire a driver at $180 per day. When approached to rent for the breakeven number of days, the equipment owner indicated that the minimum rental is for 100 days per year; however, he might consider a lower daily rental cost. What is the daily rental cost to justify renting over purchasing? If the equipment was purchased, assume it would be used for the breakeven number of days. Determine the required rental cost per day. The daily rental cost to justify renting over purchasing is determined to be $

A new antitheft system incorporating MEMS technology is being separately evaluated economically by three engineers at Dragon Technologies. The first cost of the equipment will be $90,000, and the life is estimated at 6 years with a salvage value of $9000. The engineers made different estimates of the net savings that the equipment might generate. Jacob made an estimate of $9,000 per year. Susan states that this is too low and estimates $18,000, while Tyler estimates $21,000 per year before tax. If the MARR is 8% per year, use PW to determine if these different estimates will change the decision to purchase the equipment. The present worth of the pessimistic estimate is $ The present worth of the most likely estimate is $ The present worth of the optimistic estimate is $ The equipment purchase by the pessimistic estimate is not justified The equipment purchase by the most likely estimate is not justified The equipment purchase by the optimistic estimate is justified

An IE works in the automation department of a surgical equipment manufacturing company that produces specially ordered equipment for hospitals. To upgrade the quality of the assembly process of the camera used in laparoscopic surgery probes, two approaches are available: make and buy. The make alternative has an initial equipment cost of $175,000, a life of 5 years, a $25,000 salvage value, a processing cost of $3,000 per camera, and an M&O cost of $90,000. The buy alternative requires contracting the assembly operation externally at a cost of $7,250 per camera. If the MARR is 12% per year, how many cameras per year must be assembled to justify the make alternative? 27 cameras must be assembled per year to justify the make alternative.