Question

Compare the 2 sytems at MARR = 10% per year by using tabulated factors. What system costs less over the span of 8 years.

	Pull System	Push System
Robot and Support equipement first cost, ($)	-1,500,000	-2,250,000
Annual M&O cost, ($ per year)	-700,000	-600,000
Rebuild cost in year 3, ($)	0	-500,000
Salvage Value, ($)	100,000	50,000
Estimated life, (years)	8	8

Answer 1

Alternative Pull System will cost less:
Explanation as follows:
Alternative-Pull
Year	Cash flows	PVF @ 10%	Present value
0	1500000	1	1500000
1	700000	0.909091	636363.6
2	700000	0.826446	578512.4
3	700000	0.751315	525920.4
4	700000	0.683013	478109.4
5	700000	0.620921	434644.9
6	700000	0.564474	395131.8
7	700000	0.513158	359210.7
8	600000	0.466507	279904.4
Present value of cash outflows			5187798
Note: salvage value is deducted from Year-8
Alternative-Push
Year	Cash flows	PVF @ 10%	Present value
0	2250000	1	2250000
1	600000	0.909091	545454.5
2	600000	0.826446	495867.8
3	1100000	0.751315	826446.3
4	600000	0.683013	409808.1
5	600000	0.620921	372552.8
6	600000	0.564474	338684.4
7	600000	0.513158	307894.9
8	550000	0.466507	256579.1
Present value of cash outflows			5803288
Note: Salvage value reduced from Year-8
Note: Rebuild cost is added in Year-3