6.23 Blue Whale Moving and Storage recently pur- chased a warehouse building in
ID: 2789845 • Letter: 6
Question
6.23 Blue Whale Moving and Storage recently pur- chased a warehouse building in Santiago. The manager has two good options for moving pallets of stored goods in and around the facility. Alterna- tive 1 includes a 4000-pound capacity, electric forklift (P = $-30.000: n = 12 years: AOC = s-1000 per year. S = $8000), and 500 new pallets at S10 each. The forklift operator's annual salary and indirect benefits are estimated at $32,000 Alternative 2 involves the use of two electric pallet movers ("walkies") each with a 3000-pound capacity (for each mover, P $-2000; 4 years; AOC $-150 per year; no salvage) and 800 pal lets at $10 each. The two operators' salaries and benefits will total $55,000 per year. For both op- tions, new pallets are purchased now and every 2 years that the equipment is in use. (a) If the MARR is 8% per year, select the better alternative. (b) Rework using a spreadsheet solution.Explanation / Answer
Alternative-1 Analysis
EAC for Forklift= -30,000/{(1-(1+0.08)-12)/0.08} - 1000 + 8000/{(1+0.08)12-1)/0.08} + 32,000
= -30000/7.5361 -1000 + 8000/18.9771 + 32,000
= -3980.85 -1000 + 421.56 + 32,000
= 27440.71
EAC for Pallets =(-500x10)/{(1-(1+0.08)-2)/0.08} =-5000/1.7833 = -2803.85
Total EAC for Alternative-1 = 27440.71 - 2803.85 = 24636.86
Alternative-2 Analysis
EAC for Forklift= -2000/{(1-(1+0.08)-4)/0.08} - 150 + 55,000
= -2000/3.3121 -150 + 55,000
= -603.84 -150 + 55,000
= 54246.16
EAC for Pallets =(-800x10)/{(1-(1+0.08)-2)/0.08} =-8000/1.7833 = -4486.15
Total EAC for Alternative-2 = 54246.16 - 4486.15 = 49760.00
Since, the value of EAC in Alternative-2 is higher, this should be the chosen option.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.