ternative omparis A-V Engineering Fabrication deals with large scale sophisticat
ID: 2479195 • Letter: T
Question
ternative omparis A-V Engineering Fabrication deals with large scale sophisticated rubber products, military hover craft skirts, inflatable fuel and water tanks. A new plant has recently being purchased. The new plant needs a computer controlled cutting machine. There are two alternatives: @ a new cutting machine can be purchased, oi repair the vibration and noise problem of an existing machine upon In order to fix the currently operating machine, it requires a new 'Sound Absorption' Curtain which cost $7,000 and few other parts replacements which is around $2000. Labor cost to fix the machine is around $9,000. The management is looking into the cost-benefits of using either of the tweo s based on few alternatives costs analysis. Determine the Present worth, Annual cost, and Rate of return values to choose the best investment option: in the table below? purchasing a new machine or(i) fixing the old machine, based on the values 1. Present Worth Analysis 5 points) Alternate-A calls for new machine which needs only shipping and installation costs. Alternate-B calls for the repairing an existing machine which require to purchase EasiWrap Acoustic Blanket System, few other parts and labor costs. The money is worth is 10 percent. Estimated cost data for the two plans are as follows: Repairing New Machine (alternate-A) $88,500 0 Criterion (alternate-B) 0 7,000 New machine purchase EasiWrap Acoustic Blanket System Installation / Parts replacing& repair cost Shipping expenses Machine Life $1500 $9000 2,000 15 years 0 $12000/yr 300 10 years $5000 $15000/yr Updating cost at the end of 10h year Operating costs Which alternative would you prefer?Explanation / Answer
particulars New Machine Repairing Operating Cost 12000 15000 Insurance Premium 77000 36000 Total Cost 89000 51000 PV factor(10%) 7.61 6.14 Pv of cash Outflow 677290 313140
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