Question

two advanced thermal

A manufacturing firm is considering two models of lathes. Model A will have an initial cost of $29,000, an operating cost of $2750, and a salvage value of $6500 after 6 years. Model B will have an initial cost of $36,500, an operating cost of $2200, and a $ 7750 salvage value after 12 years. At MARR of 10% per year, which model should the consulting firm buy? Hint: you can assume repeatability. (25 points)

Answer 1

fix C271 =+C270-7750 A В C E F Present value 256 Cash flows Model B PVIF@10% Model A 257 Year Model A Model B 258 Вxс A В C АxC O 29,000 $ 36,500 1 $2,750 $ 2,200 2 $ 29,000.00 $ 2,500.00 $ 1.000 $ 0.909 $ 0.826 $ 0.751 $ 0.683 $ 0.621 $ 0.564 $ 0.513 $ 0.467 $ 259 36,500.00 260 2,000.00 2,750 $2,200 3$ 261 2,272.73 $ 1,818.18 2,750 2,200 4 $ 2,066.12 $ 1,878.29 $ 1,707.53 $ 14,252.97 $ 1,411.18 $ 1,282.90 $ 1,166.27 $ 1,060.24 $ 963.86 $ (1,194.87) $ 262 1,652.89 2,750 2,200 263 1,502.63 5 $ 2,750 2,200 6 25,250 $ 2,200 7 $ 264 1,366.03 265 1,241.84 2,750 2,200 8 $ 266 1,128.95 2,750 2,200 267 1,026.32 9 $ 2,750 2,200 0.424 $ 0.386 $ 0.350 $ 0.319 $ 268 933.01 10 $ 2,750 2,200 269 848.20 2,750 $2,200 12 $ (3,750) $(5,550) 11 $ 270 771.09 271 (1,768.40) 272 $58,367.22$ 49,020.73 273 Present value of costs 274 275 Model B should be selected.

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