Question
In: Economics
To automatically insert electronic components in printed circuit boards for a cell phone production line, a...
To automatically insert electronic components in printed circuit boards for a cell phone production line, a $500,000 surface mount placement (SMP) machine is being evaluated by a manufacturing engineer at Motorolla. Over the 10-year planning horizon, it is estimated the SMP machine will produce annual cost savings of $92,500. The engineer estimates the machine will be worth $50,000 at the end of the 10-year period. Based on the firm’s 10% MARR, how long does it take for the new SMP machine to fully recover its initial cost, including the Time Value of Money (TVOM)? (i.e., use discounted payback period).
Solutions
Expert Solution
The given data is executed in an excel
Initial Investment = $500000
Discounted payback period = Year before full recovery + (Unrecovered cost beginning of the year/Cash flow during the next year)
Discounted payback period = 8 + [(500000-493478.25)/39229.25] = 8.17 years.
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Rahul Sunny answered 2 months agoRelated Solutions
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