Answered step by step
Verified Expert Solution
Question
1 Approved Answer
5 years ago, a multi-axis NC machine was purchased for the express purpose of machining large, complex parts used in commercial and military aircraft worldwide.
5 years ago, a multi-axis NC machine was purchased for the express purpose of machining large, complex parts used in commercial and military aircraft worldwide. It cost $350,000, had an estimated life of 15 years, and O\&M costs of $50,000 per year. It was originally thought to have a salvage value of $20,000 at the end of 15 years but is now believed to have a remaining life of 5 years with no salvage value at that time. With business booming, the existing machine is no longer sufficient to meet production needs. It can be kept and supplemented by purchasing a new, smaller Machine S for $195,000 that will cost $35,000 per year for O\&M, have a life of 10 years, and salvage value of $195,000(0.8t) after t years. As an alternative, a larger, faster, and more capable Machine L can be used alone to replace the current machine. It has cash price without trade-in of $480,000,0&M costs of $80,000 per year, salvage value of $480,000(0.8t) after t years, and a 15 year life. The present machine can be sold on open market for a maximum of $70,000,MARR is 30%, and the planning horizon is 5 years. b. Using an EUAC and a cash flow approach (insider's viewpoint approach), decide which is the more favorable alternative. 1. EUAC of the combination of multi-axis NC machine and machine S $ 2.EUAC of the machine L $ 3.Favorable alternative: c. Clearly show the cash flow profile for each alternative using an opportunity cost approach (outsider's viewpoint approach). c. Clearly show the cash flow profile for each alternative using an opportunity cost approach (outsider's viewpoint approach). Provide cash flow for vear t=0.3 and 5 . d. Using an EUAC comparison and an opportunity cost approach (outsider's viewpoint approach), decide which is the more favorable alternative. 1. EUAC of the combination of multi-axis NC machine and machine S $ 2. EUAC of the machine L $ 3. Favorable alternative
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started