Question

The following annual costs are associated with three new extruder machines being considered for use in...

The following annual costs are associated with three new extruder machines being considered for use in a Styrofoam cup plant:

Data

X

X-TRUD

SUPR-X

Useful Life, Years

5

13

11

First Cost

$2,300,000

$2,660,000

$2,250,000

Salvage Value

$105,000

$88,000

$91,000

Annual Benefit

$95,000

$681,000

$731,000

M&O

$75,000

$70,000

$68,000

M&O Gradient

$11,000

$15,500

$13,500


The company's interest rate (MARR) is 21%. Which extruder should the Styrofoam company choose?   
Use Annual Cash Flow Analysis and provide the right reason.

The answer choices are:

Choosing SUPR-X is best because it has the highest Annual Benefit

Choosing SUPR-X will maximize the EUAB-EAUC; its value is $210,610 higher than X and $83,938 higher than X-TRUD.

Choosing SUPR-X will maximize the EUAB-EAUC; its value is $853,610 higher than X and $135,938 higher than X-TRUD.

Choosing SUPR-X is best because it has the lowest M&O cost in yr1

I would rather you show me exactly how to work this problem than just give an answer.

0 0
Add a comment Improve this question Transcribed image text
Answer #1

MARR = 21%

We need to find EUAW of all the options

EUAW of X = -2300000*(A/P,21%,5) + 95000 - 75000 - 11000*(A/G,21%,5) + 105000*(A/F,21%,5)

= -2300000*0.341765 + 95000 - 75000 - 11000*1.624635 + 105000*0.131765

= -770095.88

EUAW of X-TRUD = -2660000*(A/P,21%,13) + 681000 - 70000 - 15500*(A/G,21%,13) + 88000*(A/F,21%,13)

= -2660000*0.229234 + 681000 - 70000 - 15500*3.57123 + 88000*0.019234

= -52423.86

EUAW of SUPR-X = -2250000*(A/P,21%,11) + 731000 - 68000 - 13500*(A/G,21%,11) + 91000*(A/F,21%,11)

= -2250000*0.239411 + 731000 - 68000 - 13500*3.221348 + 91000*0.029411

= 83514.25

As EUAW of SUPR-X is highest it should be selected

Add a comment
Know the answer?
Add Answer to:
The following annual costs are associated with three new extruder machines being considered for use in...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • The following annual costs are associated with three new extruder machines being considered for use in...

    The following annual costs are associated with three new extruder machines being considered for use in a Styrofoam cup plant: IX X-TRUD (13 Data Useful Life, Years First Cost Salvage Value Annual Benefit M&O M&O Gradient $2,070,000 $119,000 $89,000 $56,000 $13,000 $2,930,000 $87,000 $534,000 $80,000 $11,500 SUPR-X 11 $2,790,000 $108,000 $610.000 $50,000 $15,000 The company's interest rate (MARR) is 4%. Which extruder should the Styrofoam company choose? Use Annual Cash Flow Analysis and provide the right reason. O Choosing SUPR-X...

  • would someone give the correct answer please? The following annual costs are associated with three new...

    would someone give the correct answer please? The following annual costs are associated with three new extruder machines being considered for use in a Styrofoam cup plant: Data X X-TRUD SUPR-X Useful Life, Years 17 13 First Cost $2,460,000 $2,330,000 $2,760,000 Salvage Value $93,000 $98,000 $84,000 Annual Benefit $100,000 $628,000 $712,000 M&O $77,000 $80,000 $55,000 M&O Gradient $14,000 $9,500 $10,500 00 The company's interest rate (MARR) is 7%. Which extruder should the Styrofoam company choose? Use Annual Cash Flow Analysis...

  • PROBLEM The following costs are associated with three tomato-peeling machines being considered fo...

    CALCULATE FOR B PROBLEM The following costs are associated with three tomato-peeling machines being considered for use in a food canning plan Machine A S52,000 15,000 Machine B $67,000 12,000 Machine C $63,000 9,000 First cost Annual Maintenance & Operating costs Annual increase starting in year2 Annual benefit Salvage value Useful life, in years 38,000 13,000 4 37,000 22,000 12 250 31,000 19,000 If the canning company uses a MARR of 12%, which is the best alternative? Show your analysis...

  • The following costs are associated with three tomato- ling machines being considered for use in a...

    The following costs are associated with three tomato- ling machines being considered for use in a canning plant. If the canning company uses an inter- est rate of 12%, which is the best alternative? Use NPW to make your decision. (Note: Consider the least common multiple as the study period.) Machine $52,000 $63,000 $67,000 15,000 9,000 12,000 First cost O&M costs Annual benefit 38,000 31,000 37,000 Salvage value 13,000 19,000 22,000 Useful life (yrs)4 12

  • Three alternatives Machines have the following cost data associated with them. Machine Y Machine Z 10 Data Useful L...

    Three alternatives Machines have the following cost data associated with them. Machine Y Machine Z 10 Data Useful Life, Years First Cost Annual Benefit Annual M&O Costs Annual additional M&O cost in Gradient Salvage Value Loan Payment Machine X 10 $1,325,000 $265,000 $95,000 $2,300 $1,980,000 $589,000 $97,000 $2,100 $1,650,000 $435,000 $91,000 $1,980 $145,000 $150,946 $205,000 $225,565 $178,000 $187,971 The loan payments are calculated using an interest rate of 10%, a life equal to the life of the machine, and a...

  • Three alternatives Machines have the following cost data associated with them. Machine Z Data Machine X Machine Y Us...

    Three alternatives Machines have the following cost data associated with them. Machine Z Data Machine X Machine Y Useful Life, Years 10 10 10 $1,325,000 $1,980,000 $1,650,000 First Cost $265,000 $589,000 $435,000 Annual Benefit $95,000 $97,000 $91,000 Annual M&O Costs Annual additional M&O $2,300 $1,980 $2,100 cost in Gradient Salvage Value $205,000 $178,000 $145,000 Loan Payment $187,971 $150,946 $225,565 The loan payments are calculated using an interest rate of 10%, a life equal to the life of the machine, and...

  • Because of its inability to control film and personnel costs in its radiology department, Sanger General...

    Because of its inability to control film and personnel costs in its radiology department, Sanger General Hospital wants to replace its existing picture archive and communication (PAC) system with a newer version. The existing system, which has a current book value of $2,250,000, was purchased three years ago for $3,600,000 and is being depreciated on a straight-line basis over an eight-year life to a salvage value of $0. This system could be sold for $800,000 today. The new PAC system...

  • Match the following: Adam Smith David Ricardo John Maynard Keynes Choices: (2 are not used.) a....

    Match the following: Adam Smith David Ricardo John Maynard Keynes Choices: (2 are not used.) a. founder of modern market economics comparative advantage-argument for mutual benefits of international trade comparative advantage-emphasized job displacements of international trade founder of modern macroeconomics invented capitalism duo If a firm has trouble selling its good, it can lower price. increase demand. decrease supply. both a) and b) are correct. 6. People often pay too much for goods because they are not aware of which...

  • Please use own words. Thank you. CASE QUESTIONS AND DISCUSSION > Analyze and discuss the questions...

    Please use own words. Thank you. CASE QUESTIONS AND DISCUSSION > Analyze and discuss the questions listed below in specific detail. A minimum of 4 pages is required; ensure that you answer all questions completely Case Questions Who are the main players (name and position)? What business (es) and industry or industries is the company in? What are the issues and problems facing the company? (Sort them by importance and urgency.) What are the characteristics of the environment in which...

  • SYNOPSIS The product manager for coffee development at Kraft Canada must decide whether to introduce the...

    SYNOPSIS The product manager for coffee development at Kraft Canada must decide whether to introduce the company's new line of single-serve coffee pods or to await results from the product's launch in the United States. Key strategic decisions include choosing the target market to focus on and determining the value proposition to emphasize. Important questions are also raised in regard to how the new product should be branded, the flavors to offer, whether Kraft should use traditional distribution channels or...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT