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Your company is considering investing in a new production machine. Three of the machine's parameters are considered uncertain: the initial investment, units produced and
Your company is considering investing in a new production machine. Three of the machine's parameters are considered uncertain: the initial investment, units produced and MARR. A sensitivity graph which plots the present worth of the machine vs. the percentage change from the base case is illustrated below. The values used for the base case are provided in the table. Cost category Initial investment Units produced MARR Base case $25,000 50,000 10% $50,000 $40,000 $30,000 $20,000 PW $10,000 0 -$10,000 -$20,000 Units Produced Initial Investment MARR -10% 8% -6% 4% -2% 0% 2% 4% 6% 8% 10% Percentage Change from Base Case (a) The profitability of this machine is most susceptible to which parameter? Select the correct parameter between Part (a) options 1 to 4. (b) What is the break even MARR? Select the correct break even MARR between Part (b) options 1 to 4. (c) What is the break even cost for the initial investment? Select the correct break even cost between Part (c) options 1 to 4. Select 3 correct answer(s) Part (a) - Option 1: Initial investment Part (a) - Option 2: MARR Part (a) Option 3: Present worth Part (a) - Option 4: Units produced Part (b) - Option 1: break even MARR = 6% Part (b) Option 2: break even MARR = 10% Part (b) Option 3: break even MARR = 10.6% Part (b) - Option 4: break even MARR = 9.2% Part (c) - Option 1: break even cost for initial investment = $27,500 Part (c) Option 2: break even cost for initial investment = $2,500 Part (c) Option 3: break even cost for initial investment = $22,500 | Part (c) - Option 4: break even cost for initial investment = $24,500
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