An overhead-crane was installed 15 years at the main production line of a manufacturing company at a cost of RM1.2 million and the annual operating cost is RM15,000. The salvage value at the estimated 25-year life is RM10,000. Today, after 7 years of utilization, the crane can be sold at the price of RM100,000 A proposal has been made replace with more efficient and compact overhead- crane crane for a cost of RM2.5 million. The new overhead-crane would have a life of 25 years and the salvage value of 200,000. Its annual operating cost would be 50% of the existing one. Interest rate is 8% while the annual insurance is 1.5% of the initial cost for both cranes. Is it financially justified to replace the existing overhead-crane? Justify your answer. 1. 2. 3. Single Payment Compound Amount Factor F=PX (1+1) F = (1+0"-...) Present Worth Factor (1+1) = (1+0+*+6) Uniform Series Compound Amount Factor ((1+1)-1] F = Ax F (1+0)"-1 *G-) Uniform Series Sinking Fund Factor A =FX4+1 A (1+1)". -1 Ain) Uniform Series Capital Recovery Factor 1X (1+1)* A=P- (1+1)-1 Aix (1+1) (1 + )" - 1 cm Uniform Present Worth Factor (1+1)"-1 P=A- IX (1+1)-1 P_(1 + )"-1 AIX (1+1)" Gun) Net Present Value 5. 6. 7. CR NPV = -P+CP1120 Ix[1+1 (1+1) An overhead-crane was installed 15 years at the main production line of a manufacturing company at a cost of RM1.2 million and the annual operating cost is RM15,000. The salvage value at the estimated 25-year life is RM10,000. Today, after 7 years of utilization, the crane can be sold at the price of RM100,000 A proposal has been made replace with more efficient and compact overhead- crane crane for a cost of RM2.5 million. The new overhead-crane would have a life of 25 years and the salvage value of 200,000. Its annual operating cost would be 50% of the existing one. Interest rate is 8% while the annual insurance is 1.5% of the initial cost for both cranes. Is it financially justified to replace the existing overhead-crane? Justify your answer. 1. 2. 3. Single Payment Compound Amount Factor F=PX (1+1) F = (1+0"-...) Present Worth Factor (1+1) = (1+0+*+6) Uniform Series Compound Amount Factor ((1+1)-1] F = Ax F (1+0)"-1 *G-) Uniform Series Sinking Fund Factor A =FX4+1 A (1+1)". -1 Ain) Uniform Series Capital Recovery Factor 1X (1+1)* A=P- (1+1)-1 Aix (1+1) (1 + )" - 1 cm Uniform Present Worth Factor (1+1)"-1 P=A- IX (1+1)-1 P_(1 + )"-1 AIX (1+1)" Gun) Net Present Value 5. 6. 7. CR NPV = -P+CP1120 Ix[1+1 (1+1)