A small manufacturing company is considering expanding its operation by adding new product lines.
Any or all of the product lines shown below can be added. If the company uses a MARR of
15% per year and a 5-year project period, which products, if any, should the company manufacture?
1 2 3 4
Initial cost, $ -340,000 -500,000 -570,000 -620,000
Annual cost, $/year -70,000 -64,000 -50,000 – 40,000
Annual savings, $/year 180,000 190,000 220,000 205,000
Work out the solutions longhand (below)
A mechanical engineer is considering two robots for improving materials handling in the production
of rigid shaft couplings that mate dissimilar drive components. Robot X has a first cost of
$84,000, an annual maintenance and operation (M&O) cost of $31,000, a $40,000 salvage value, and
will improve net revenues by $96,000 per year. Robot Y has a first cost of
$146,000, an annual M&O cost of $28,000, a $47,000 salvage value, and will increase net revenues by
$119,000 per year. Which one should be selected on the basis of a rate of return
analysis if the companyÝ¢ï¿½ï¿½s MARR is 15% per year? Use a three-year study period.
Use Excel to create a table and solve the problem. List your answer below.