Question

In: Accounting

A new production system for a factory is to be purchased and installed for $114,666. This...

A new production system for a factory is to be purchased and installed for $114,666. This system will save approximately 300,000 kWh of electric power each year for a 6-year period. Assume the cost of electricity is $0.10 per kWh, and factory MARR is 15% per year, and the salvage value of the system will be $8,666 at year 6. Using the AW method to analyzes if this investment is economically justified

A. calculate the AW of the above investment and insert the result below.

B. Based on the AW value you got in the previous question, is this investment economically justified or not? type you explanation below

A. For the below ME alternatives , which machine should be selected based on the AW analysis. MARR=10%

	Machine A	Machine B	Machine C
First cost, $	17,311	30000	10000
Annual cost, $/year	9,377	6,000	4,000
Salvage value, $	4,000	5,000	1,000
Life, years	3	6	2

AW for machine A=

B. For the below ME alternatives , which machine should be selected based on the AW analysis. MARR=10%

	Machine A	Machine B	Machine C
First cost, $	15000	23,182	10000
Annual cost, $/year	8,775	6,000	4,000
Salvage value, $	4,000	5,000	1,000
Life, years	3	6	2

AW for machine B=

C. For the below ME alternatives, which machine should be selected based on the AW analysis. MARR=10%.

	Machine A	Machine B	Machine C
First cost, $	15000	30000	14,534
Annual cost, $/year	17,872	6,000	4,000
Salvage value, $	4,000	5,000	1,000
Life, years	3	6	2

AW for machine C =

D. Based on the AW value you got in the previous 3 questions, which machine we should select? type you an explanation below

A. for the below two machines and based on AW analysis which machine we should select? MARR=10%.

	Machine A	Machine B
First cost, $	27,933	100,000
Annual cost, $/year	10,943	7,000
Salvage value, $	5,730	-
Life, years	3	infinite

the AW for machine A=

B. For th below two machines and based on AW analysis which machine we should select? MARR=10%

	Machine A	Machine B
First cost, $	23,260	145,907
Annual cost, $/year	14,596	9,899
Salvage value, $	6,579	-
Life, years	3	infinite

the AW for machine B=

C. Based on the AW value you got in the previous 2 questions, which machine we should select? type you an explanation below

Expert Solution

ekkarill92 answered 2 years ago

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