Answered step by step
Verified Expert Solution
Question
1 Approved Answer
For full credit on Questions 1 and 3, construct the cash flow diagrams with the correct cash inflows and outflows; show the compound interest factors
For full credit on Questions 1 and 3, construct the cash flow diagrams with the correct cash inflows and outflows; show the compound interest factors used and any intermediate calculations. 1. (10 pts). A manufacturing plant must replace its 1250cfm plant air compressor, which has reached the end of its useful life. It is considering two options: a. Option A is a 2500cfm unit that costs $55,000 and would replace the 1250cfm unit and a second 1250cfm unit that was scheduled to be replaced in year 5 at a cost of $30,000. . Changes to the plant air piping and a larger electrical service will cost $15,000., but the larger compressor will save $2,000 per year in electrical costs. Option A has a salvage value (remaining useful life) of $10,000 in year 10 . The second 1250cfm unit would have no salvage value when it is removed in year 5 . b. Option B would replace the 1250cfm unit with one having the same capacity and costing $30,000. There is no cost for piping or electrical work, and electrical savings are expected to be $500 per year. Option B has a salvage value (remaining useful life) of $5000 at year 10 . The manufacturer requires a 12% MARR on replacement projects. Using Net Present Worth and a 10 year analysis period to evaluate both options, which would you recommend and why
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