A machine requires a capital investment of $200,000 and operating expenses will be 20% of the revenue

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A machine requires a capital investment of $200,000 and operating expenses will be 20% of the revenue from the sale of the product produced using the machine. It is found that the machine is highly productive and produces 1,000,000 products per year. The probability of purchasing the machine is about 10%.
a. If the product is sold for $20 per unit, what is the E(PW) of profit to the owner/operator of this machine? The life of the machine is 10 years and MARR is 12% per year.
b. Repeat Part (a) when the life of the machine is eight years.
c. Perform one-at-a-time sensitivity analyses for ±20 per cent changes in yearly production and selling price of the product. Use a 10-year life for the machine.
MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
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Engineering Economy

ISBN: 978-0132554909

15th edition

Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

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