Problem #1: A press brake is used to bend metal. Currently, the press brake your company...
Problem #1: A press brake is used to bend metal. Currently, the press brake your company owns has a market value of $50,000. The machine's operating cost is $20,000 per year. If the machine is kept for one year it will have a salvage value of $40,000. If the machine is kept for two years, it will have a salvage value $10,000. Your company could hire another company to bend metal for your parts. The other company quoted you at $42,000 per year. Assume a %10 interest rate. Should your company continue using the press brake or hire the other company. If you decide to hire the other company, when should you?
Homework Answers
EUAC press brake for one year = 50000 * (A/P, 10%,1) + 20000 - 40000 * (A/F, 10%,1)
= 50000 * 1.1 + 20000 - 40000 * 1
= 35000
EUAC press brake for two year = 50000 * (A/P, 10%,2) + 20000 - 10000 * (A/F, 10%,2)
= 50000 * 0.576190 + 20000 - 10000 * 0.476190
= 44047.62
As EUAC of hiring outside company = 42000
EUAC of existing company is less for one year than the outside company, so company should keep press for one year
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