9. Smith Construction Inc. needs additional Crushing Equipment the following Dat

Question

9. Smith Construction Inc. needs additional Crushing Equipment the following Data are Available: The financial data for each model are given: Model I) Smart Crush $52,000 I) Supper Crush $63,000 IlI) Savage Crush $105,000 Useful Life Salvage Value Annual benefits Annual Operating Cost $38,000 $31,000 nitial Cost 4 years13,000 6 Years 19,000 $15,000 $ 9,000 $12,000 ears 22,000 37,000 If MARR of 10% which alternative-Model, if any, should be chosen? With a 12-Year analysis period is necessa and NPW Method. Explain in detail your setup, Formula, Calculation, and recommendation

Explanation / Answer

Smart Crush

Supper crush

Savage Crush

Year

Cost

Benefit

Net cash flow

Cost

Benefit

Net cash flow

Cost

Benefit

Net cash flow

0

-52000

-52000

-63000

-63000

-105000

-105000

1

-15000

38000

23000

-9000

31000

31000

-12000

37000

25000

2

-15000

38000

23000

-9000

31000

31000

-12000

37000

25000

3

-15000

38000

23000

-9000

31000

31000

-12000

37000

25000

4

-15000

51000

36000

-9000

31000

31000

-12000

37000

25000

5

-9000

31000

31000

-12000

37000

25000

6

-9000

50000

50000

-12000

37000

25000

7

-12000

37000

25000

8

-12000

37000

25000

9

-12000

37000

25000

10

-12000

37000

25000

11

-12000

37000

25000

12

-12000

59000

47000

NPV

29,786.08

82,738.09

72,352.17

NPV= NPV(0.1, Net positive cash) + initial investment

Based on NPV, Supper crush has the highest NPV which is the best alternative compared with others

Smart Crush

Supper crush

Savage Crush

Year

Cost

Benefit

Net cash flow

Cost

Benefit

Net cash flow

Cost

Benefit

Net cash flow

0

-52000

-52000

-63000

-63000

-105000

-105000

1

-15000

38000

23000

-9000

31000

31000

-12000

37000

25000

2

-15000

38000

23000

-9000

31000

31000

-12000

37000

25000

3

-15000

38000

23000

-9000

31000

31000

-12000

37000

25000

4

-15000

51000

36000

-9000

31000

31000

-12000

37000

25000

5

-9000

31000

31000

-12000

37000

25000

6

-9000

50000

50000

-12000

37000

25000

7

-12000

37000

25000

8

-12000

37000

25000

9

-12000

37000

25000

10

-12000

37000

25000

11

-12000

37000

25000

12

-12000

59000

47000

NPV

29,786.08

82,738.09

72,352.17

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