Fiesta Foundry is considering a new furnace that will allow them to be more productive. Three alternative furnaces are under consideration. Perform an incremental analysis of these alternatives using the IRR method for each increment of cash flows. The MARR is 15% per year.
Furnace A Furnace B Furnace C $470,000 $60,000 $380,000 $60,000 $200,000 $60,000 Initial investment Annual revenues Annual cost $13,000 $35,000 20 years Annual revenue and cost figures are increases over the "do nothing" alternative (DN) $14,000 $13,000 $45,000 20 years $45,000 20 years Salvage value Life of asset Discrete Compounding; i=15% Single Payment Uniform Series Compound Amount Sinking Fund Capital Recovery Factor Compound Amount Present Present Factor Worth Factor Factor Worth Factor Factor To Find P To Find F To Find F To Find P To Find A To Find A Given F Given A Given A Given P Given F Given P PIA FIP PIF FIA AIF AIP 1.0000 1.1500 1 1.1500 0.8696 0.8696 1.0000 0.7561 0.4651 0.6151 2 1.3225 2.1500 1.6257 2.2832 0.2880 3 1.5209 0.6575 3.4725 0.4380 0.5718 4 1.7490 4.9934 2.8550 0.2003 0.3503 2.0114 5 0.4972 6.7424 3.3522 0.1483 0.2983 0.4323 0.1142 6 2.3131 8.7537 3.7845 0.2642 7 2.6600 0.3759 11.0668 4.1604 0.0904 0.2404 8 3.0590 0.3269 13.7268 4.4873 0.0729 0.2229 0.2843 9 3.5179 16.7858 4.7716 0.0596 0.2096 0.2472 20.3037 5.0188 10 4.0456 0.0493 0.1993 0.2149 11 4.6524 24.3493 5.2337 0.0411 0.1911 5.3503 12 0.1869 29.0017 5.4206 0.0345 0.1845 34.3519 13 6.1528 0.1625 5.5831 0.0291 0.1791 14 7.0757 0.1413 40.5047 5.7245 0.0247 0.1747 8.1371 47.5804 0.0210 0.1710 15 0.1229 5.8474 Furnace A Furnace B Furnace C $470,000 $60,000 $380,000 $60,000 $200,000 $60,000 Initial investment Annual revenues Annual cost $13,000 $35,000 20 years Annual revenue and cost figures are increases over the "do nothing" alternative (DN) $14,000 $13,000 $45,000 20 years $45,000 20 years Salvage value Life of asset Discrete Compounding; i=15% Single Payment Uniform Series Compound Amount Sinking Fund Capital Recovery Factor Compound Amount Present Present Factor Worth Factor Factor Worth Factor Factor To Find P To Find F To Find F To Find P To Find A To Find A Given F Given A Given A Given P Given F Given P PIA FIP PIF FIA AIF AIP 1.0000 1.1500 1 1.1500 0.8696 0.8696 1.0000 0.7561 0.4651 0.6151 2 1.3225 2.1500 1.6257 2.2832 0.2880 3 1.5209 0.6575 3.4725 0.4380 0.5718 4 1.7490 4.9934 2.8550 0.2003 0.3503 2.0114 5 0.4972 6.7424 3.3522 0.1483 0.2983 0.4323 0.1142 6 2.3131 8.7537 3.7845 0.2642 7 2.6600 0.3759 11.0668 4.1604 0.0904 0.2404 8 3.0590 0.3269 13.7268 4.4873 0.0729 0.2229 0.2843 9 3.5179 16.7858 4.7716 0.0596 0.2096 0.2472 20.3037 5.0188 10 4.0456 0.0493 0.1993 0.2149 11 4.6524 24.3493 5.2337 0.0411 0.1911 5.3503 12 0.1869 29.0017 5.4206 0.0345 0.1845 34.3519 13 6.1528 0.1625 5.5831 0.0291 0.1791 14 7.0757 0.1413 40.5047 5.7245 0.0247 0.1747 8.1371 47.5804 0.0210 0.1710 15 0.1229 5.8474
