Garrett Boone, Farish Enterprises’ vice president of operations, needs to replac
ID: 2460371 • Letter: G
Question
Garrett Boone, Farish Enterprises’ vice president of operations, needs to replace an automatic lathe on the production line. The model he is considering has a sales price of $289,495 and will last for 8 years. It will have no salvage value at the end of its useful life. Garrett estimates the new lathe will reduce raw materials scrap by $37,100 per year. He also believes the lathe will reduce energy costs by $28,350 per year. If he purchases the new lathe, he will be able to sell the old lathe for $5,206.
Explanation / Answer
Savings due to new model = (37100+28350)*8 + 5260 = 528806
Cost of new model = 289495
Net savings = $ 239311 (528806-289495)
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