1. A $500,000 surface-mount placement machine is being evaluated by a manufactur
ID: 2796296 • Letter: 1
Question
1. A $500,000 surface-mount placement machine is being evaluated by a manufacturing engineer. The machine is proposed for use on an assembly line to automatically insert electronic components onto printed circuit boards. The engineer estimates that bringing the machine online will result in annual cost savings of $92,500 and that, at the end of the 10 year planning horizon, the machine will have a market value of 10% of its initial cost. The MARR is 10%. Solve this problem with EXCEL. a) Create a cash flow table b) Plot a cash flow diagram (from the table values in part-a) c) Is the investment economically viable based on a PW-analysis? d) Create a table of cumulative PW w.r.t. N e) Plot PW vs. N (from the table values in part-d) f) Based on the plot in part-e, what year does breakeven occur? g) Based on part-f, is this investment risky? Yes/No with a brief explanation.Explanation / Answer
(e) Based on cum. present worth break even occur between = 8 to 9 years
= 8 + (-6519.33)/(-6519.33-32709.7)*12
= 8 year and 2 months
(g) Yes It is a risky investment as period of break even is quite lengthy 9 years means you will get your investment return in 9 year means it would be approx 10%. which will not be feasiable.
Note - I am unable to paste/attach excel/word file of cash flow diagram. i can send if you mention you email id in comments.
Please note all values are in $.
In case of any query please comment.
(a) Year 0 1 2 3 4 5 6 7 8 9 10 PW/NPV Initial investment -500000 cost saving 92500 92500 92500 92500 92500 92500 92500 92500 92500 92500 salvage value 50000 Cash Flow -500000 92500 92500 92500 92500 92500 92500 92500 92500 92500 142500 PV @10% factor 1 0.909091 0.826446 0.751315 0.683013 0.620921 0.564474 0.513158 0.466507 0.424098 0.385543 Present value -500000 84090.91 76446.28 69496.62 63178.74 57435.22 52213.84 47467.13 43151.93 39229.03 54939.92 87649.62 Cum. Present worth -500000 -415909 -339463 -269966 -206787 -149352 -97138.4 -49671.3 -6519.33 32709.7 87649.62Related Questions
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