Question 5 3.00000 points Save Answer A local food canning plant is considering

Question

Question 5 3.00000 points Save Answer A local food canning plant is considering to purchase a tomato-peeling machine. The purchasing manager prepared the following proformas. If the the manager decides to use MARR of 12%, which machine is the best alternative based on present worth analysis? Hint: consider the least common multiple as the study period. Cash flow Initial cost Maintenance & operating costs $15,000 Annual benefits Salvage value Useful life, in years Machine A Machine B Machine C $52,000 $63,000 $67,000 $9,000 $12,000 $38,000 $31,000 $37,000 $13,000 $19,000 $22,000 4 6 12

Explanation / Answer

The Best Machine is Machine C as per table below.Beacuse Present worth of C is highest.

A B C D E F G H I J K L M 1 Year 0 1 2 3 4 5 6 7 8 9 10 11 12 2 Machine A 3 Initial Cost -52000 4 Maintenenace and Operating Costs -15000 -15000 -15000 -15000 5 Annual Benefits 38000 38000 38000 38000 6 Salvage live 13000 7 Initial Cost -52000 8 Maintenenace and Operating Costs -15000 -15000 -15000 -15000 9 Annual Benefits 38000 38000 38000 38000 10 Salvage live 13000 11 Initial Cost -52000 12 Maintenenace and Operating Costs -15000 -15000 -15000 -15000 13 Annual Benefits 38000 38000 38000 38000 14 Salvage live 13000 15 Final Cash flows -52000 23000 23000 23000 -16000 23000 23000 23000 -16000 23000 23000 23000 36000 16 Discount rate 0.12 NPV or PW $53,270.73 NPV(A16,B15:M15) + A15 A B C D E F G H I J K L M 1 Year 0 1 2 3 4 5 6 7 8 9 10 11 12 2 Machine B 3 Initial Cost -63000 4 Maintenenace and Operating Costs -9000 -9000 -9000 -9000 -9000 -9000 5 Annual Benefits 31000 31000 31000 31000 31000 31000 6 Salvage live 19000 7 Initial Cost -9000 -9000 -9000 -9000 -9000 -9000 8 Maintenenace and Operating Costs 31000 31000 31000 31000 31000 31000 9 Annual Benefits 19000 10 Salvage live 11 Final Cash flows -63000 22000 22000 22000 22000 22000 41000 22000 22000 22000 22000 22000 41000 12 Discount rate 0.12 NPV or PW $87,779.05 NPV(A12,B11:M11)+A11 A B C D E F G H I J K L M 1 Year 0 1 2 3 4 5 6 7 8 9 10 11 12 2 Machine C 3 Initial Cost -67000 4 Maintenenace and Operating Costs -12000 -12000 -12000 -12000 -12000 -12000 -12000 -12000 -12000 -12000 -12000 -12000 5 Annual Benefits 37000 37000 37000 37000 37000 37000 37000 37000 37000 37000 37000 37000 6 Salvage live 22000 7 Final Cash Flows -67000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 47000 8 Discount rate 0.12 NPV or PW $93,506.21 NPV(A8,B7:M7)+A7

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