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Credit 10 points. You must get the entire answer correct to scorng an question. You must show the calculations for numerical answers tor aaswer into the answer box is not acceptable. (K) You are thinking of Simply writing in purchasing a new parts feeder for your pick and place l yo to your printed circuit board factory. The machine costs $20,000 save $12,000 per year in labor costs for 6 years You will also have maintenance costs of $5,500 per year to peare machine will have a market value of $1,000 at the erd 20%. of 6 years. Your MARR method? Calculate the Should you make this investment, based on the future worth future worth after 6 years, and Show all of your calculations. state Yes or No if you should make this investment. Answer Box:

Explanation / Answer

Initial investment: $20000

Annual revenue: $12000

Annual operating cost: $5500

Salvage cost at the end of 6 yrs: $1000

Study period (n): 6

MARR (i) : 20%

Future worth = -Initial Investment* (F/P,i,n) + (Annual revenue-Annual operating cost)(F/A,i,n) + Salvage value at n

Here, (F/P,i,n) = Single payment compound amount factor

                        = (1+i)^n

In this case, (F/P,20,6) = (1+0.2)^6 = (1.2)^6= 2.985

(F/A,i,n) = Uniform series compound amount factor

               = ((1+i)^n -1)/i

So, (F/A, 20, 6) = ((1+0.2)^6 -1)/0.2 =((1.2)^6 – 1) / 0.2

                        = (2.985-1)/0.2 = 9.929

So, Future worth = -20000 * 2.985 + (12000-5500)*9.929 + 1000

                        = -59700 + 64538.5 +1000 = $ 5838.5              

As future worth is >=0, the project is profitable, so the investment must be made.

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