Years 4 You are working at an engineering company called "Muhendis, Inc.". Your boss, Imran, asks you to evaluate two options for an investment project which would bring quantified benefits to your company. The project life is estimated as 5 years. Muhendis, Inc. wants to expand its production line by buying new machines and each machine's purchas- ing cost is $9,500, while each machine is able to produce 2.000 units of the end product. Additionally, Muhendis spends an installation fee of $740 per machine, immediately when purchased. The marketing department forecasted the next five year's demand. The results are shown in the table. How much to produce and satisfy the demand is up to the project manager, which is you. 0 1 2 3 5 Demand 0 15000 17000 19500 17500 18000 Muhendis sells a unit produced for $2.99. On the other side, the cost of raw materials is $0.42 per unit produced. To compute the labor cost consider that the company pays $14 per hour and a worker needs 3.6 minutes to finish one unit. The annual overhead (fixed cost) is $1,200. These machines would last Muhendis for 10 years and they fall in 7-year MACRS class. You already found a suitable buyer for all the machines in the next 5 years so the project would end early in year 5. The buyers will pay 30% of the purchasing cost per machine as the salvage cost. Company's MARR is given as 15% and the tax rate is 21%. Your job is to summarize quantified benefits of this company from this project and file a report 1.4 Sensitivity analysis (25%) Perform a sensitivity analysis on the variables given below plus find their break-even points. Number of machines Labor cost (s per hr). Loaned amount, Unit selling price (S/unit), MARR Conclude the analysis using graphs, tables etc. and summarize your finding in your report. Figure the break-even point of the key variable. 1.2 Loan (15%) Using the number of machines decided above (if you haven't found a solution, purchase 2 machines for the remaining parts), consider taking a loan. You can borrow 90% of the purchasing cost from a bank, with 11.45% interest rate, compounded yearly, payed yearly for 4 years. Find out if the loan is useful or not. Years 4 You are working at an engineering company called "Muhendis, Inc.". Your boss, Imran, asks you to evaluate two options for an investment project which would bring quantified benefits to your company. The project life is estimated as 5 years. Muhendis, Inc. wants to expand its production line by buying new machines and each machine's purchas- ing cost is $9,500, while each machine is able to produce 2.000 units of the end product. Additionally, Muhendis spends an installation fee of $740 per machine, immediately when purchased. The marketing department forecasted the next five year's demand. The results are shown in the table. How much to produce and satisfy the demand is up to the project manager, which is you. 0 1 2 3 5 Demand 0 15000 17000 19500 17500 18000 Muhendis sells a unit produced for $2.99. On the other side, the cost of raw materials is $0.42 per unit produced. To compute the labor cost consider that the company pays $14 per hour and a worker needs 3.6 minutes to finish one unit. The annual overhead (fixed cost) is $1,200. These machines would last Muhendis for 10 years and they fall in 7-year MACRS class. You already found a suitable buyer for all the machines in the next 5 years so the project would end early in year 5. The buyers will pay 30% of the purchasing cost per machine as the salvage cost. Company's MARR is given as 15% and the tax rate is 21%. Your job is to summarize quantified benefits of this company from this project and file a report 1.4 Sensitivity analysis (25%) Perform a sensitivity analysis on the variables given below plus find their break-even points. Number of machines Labor cost (s per hr). Loaned amount, Unit selling price (S/unit), MARR Conclude the analysis using graphs, tables etc. and summarize your finding in your report. Figure the break-even point of the key variable. 1.2 Loan (15%) Using the number of machines decided above (if you haven't found a solution, purchase 2 machines for the remaining parts), consider taking a loan. You can borrow 90% of the purchasing cost from a bank, with 11.45% interest rate, compounded yearly, payed yearly for 4 years. Find out if the loan is useful or not
