Question

Given that the typical belt conveyor speed can be up to 65 feet per minute and the cost of this type of conveyor has been estimated to be $5000/m with a service life of 10 years (ignore the possible salvage at the end of the service life as it is considered to be compensated by the requirement of the demolition charge!) and the internal rate of return is 0.5% per month. The products which are going to be transferred will have maximum length of 10 inches. The production rate is from 10 products to a maximum of 15 products per minute and a minimum of 8 inches spacing is required between any two products on the conveyor. Now, you are asked to determine whether a conveyor is able serve the purpose or not before you put it into your equipment selection list. If this conveyor is 36 m length and it fits our purpose, what will be the fixed cost (per month)? (Given: 1 m = 3.28 feet)

Answer 1

Decision in respect of conveyor is able to serve the purpose

Cost of conveyor - $5000/m and service life - 10 years.

Products to be transferred has maximum length -10 inches.

Production rate - 10 -15 products per minute.

Minimum 8 inches gap between any two products.

Conveyor speed is maximum 65 ft per minute=> 780 inches per minute

8 inches gap is 780/8=97.5 times per minutes= 98 (round off) per minute

maximun no of products per minute= 98/2=49 ( as 2 products are there between minimum 8 inches gap).But maximum no of products is limited to 15.

1m=3.28 ft=> 12ft=3.66 m so cost of conveyor is $5000*3.66=$18293

Internal rate of return is .5% p.m which means PV of cash outflows= PV of cash inflows at 6% p.a

Demolition charge p.a =18293/10=$1829 p.a

PVF of cash outflows @6% p.a= 7.360087*1829=$13462.

PVF of cash inflows = 13462.

0.943396
0.889996
0.839619
0.792094
0.747258
0.704961
0.665057
0.627412
0.591898
0.558395
7.360087

So conveyor is able to serve the purpose.

2. 36 m=118.08 ft=>9.84 inches

Cost of conveyor= $18293 fixed cost p.a= $1829=> fixed cost p.m = $152.42