A food company needs $800,000 to purchase a new machine which will be used to peel potatoes. The system is expected to have an 8-year service life. 180,000 per year will be saved in labor and...


A food company needs $800,000 to purchase<br>a new machine which will be used to peel<br>potatoes. The system is expected to have an<br>8-year service life. 180,000 per year will be<br>saved in labor and materials. However, it will<br>require additional costs over eight years. The<br>additional cost is 42,000 in year one. These<br>expenses increase by 2% each year. Assuming<br>a $20,000 salvage value at the end of year<br>eight and a MARR=12% per year, use the<br>NPW method to check whether the project is<br>justifiable.<br>Note: You must use (P/A1,g,i,N) formula while<br>finding the present value of the geometric<br>gradient series in Question 3. You would lose<br>points in case you take each cash flow<br>individually to time 0.<br>

Extracted text: A food company needs $800,000 to purchase a new machine which will be used to peel potatoes. The system is expected to have an 8-year service life. 180,000 per year will be saved in labor and materials. However, it will require additional costs over eight years. The additional cost is 42,000 in year one. These expenses increase by 2% each year. Assuming a $20,000 salvage value at the end of year eight and a MARR=12% per year, use the NPW method to check whether the project is justifiable. Note: You must use (P/A1,g,i,N) formula while finding the present value of the geometric gradient series in Question 3. You would lose points in case you take each cash flow individually to time 0.

Jun 04, 2022
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