Your company manufactures circuit boards and other electronic parts for various commercial products. Design changes in part

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Your company manufactures circuit boards and other electronic parts for various commercial products. Design changes in part of the product line, which are expected to increase sales, will require changes in the manufacturing operation. The cost basis of new equipment required is $220,000 (MACRS five-year property class). Increased annual revenues, in year zero dollars, are estimated to be $360,000. Increased annual expenses, in year zero dollars, are estimated to be $239,000. The estimated market value of equipment in actual dollars at the end of the six-year analysis period is $40,000. General price inflation is estimated at 4.9% per year; the total increase rate of annual revenues is 2.5%, and for annual expenses it is 5.6%; the after-tax MARR (in market terms) is 10% per year (im); and t = 39%.
a. Based on an after-tax, actual-dollar analysis, what is the maximum amount that your company can afford to spend on the total project (i.e., changing the manufacturing operations)? Use the PW method of analysis.
b. Develop (show) your ATCF in real dollars.

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Engineering Economy

ISBN: 978-0133439274

16th edition

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

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