Q5 (ILOS measured: For Independent IRR Projects answer the following question The High Society Baked Bean Co. is considering a new canner. The canner costs $120 000 and will have a scrap value of $5000 after its 10-year life. Given the expected increases in sales, the total savings due to the new canner, compared with continuing with the current operation, will be $15 000 the first year, increasing by $5000 each year thereafter. Total extra costs due to the more complex equipment will be $10 000 per year. The MARR for High Society is 12 percent. Should it invest in the new canner? Note: There are several ways a student can do this. In this problem, equating annual outflows and receipts appears to be the easiest approach, because most of the cash flows are already stated every year. 5000(A/F,i,10)+15 000 + 5000(A/G,i,10) -120 000(A/P,i,10) 10 000 = 0 The figure below shows high society baked bean canner to help the student to achieve the best -$120 000 Gradient of $5000 per year 3 4 5 6 7 8 9 10 $60 000 $15.000 $10 000

Q5 (ILOS measured: For Independent IRR Projects answer the following question The High Society Baked Bean Co. is considering a new canner. The canner costs $120 000 and will have a scrap value of $5000 after its 10-year life. Given the expected increases in sales, the total savings due to the new canner, compared with continuing with the current operation, will be $15 000 the first year, increasing by $5000 each year thereafter. Total extra costs due to the more complex equipment will be $10 000 per year. The MARR for High Society is 12 percent. Should it invest in the new canner? Note: There are several ways a student can do this. In this problem, equating annual outflows and receipts appears to be the easiest approach, because most of the cash flows are already stated every year. 5000(A/F,i,10)+15 000 + 5000(A/G,i,10) -120 000(A/P,i,10) 10 000 = 0 The figure below shows high society baked bean canner to help the student to achieve the best -$120 000 Gradient of $5000 per year 3 4 5 6 7 8 9 10 $60 000 $15.000 $10 000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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