Q.1 (25pts) The TT Racing and Performance Motor Corporation wishes to evaluate two alternative machines for NASCAR motor tune-ups. Machine R has an initial cost of $251,477 and a life of 3 years. Machine S has an initial cost of $372,340 and a life expectancy of 5 years. The annual operating cost (AOC) for Machine R is expected to be $40,531 in year 1, increasing by $5,000 each year, while the AOC for Machine S is expected to be $50,381. If the salvage values are $20,352 and $25,876 for Machine R and Machine S respectively, use the Present Worth method at 9% per year to select the better alternative.
9%
TABLE 14 Discrete Cash Flow: Compound Interest Factors
9% Arithmetic Gradients P/G A/G Gradient Gradient Present Worth Uniform Series
Single Payments F/P P/F Compound Present Amount Worth 1.0900 0.9174 1.1881 0.8417 1.2950 0.7722 1.4116 0.7084 1.5386 0.6499 1.6771 0.5960 1.8280 0.5470 1.9926 0.5019 2.1719 0.4604 2.3674 0.4224 2.5804 0.3875 2.8127 0.3555 3.0658 0.3262 3.3417 0.2992 3.6425 0.2745
Uniform Series Payments F/A A/P Compound Capital Amount Recovery 1.0000 1.0900 2.0900 0.56847 3.2781 0.39505 4.5731 0.30867 5.9847 0.25709 7.5233 0.22292 9.2004 0.1969 11.0285 0.18067 13.0210 0.16680 15.1929 0.15582 17.5603 0.14695 20.1407 0.13965 22.9534 0.13357 26.0192 0.12843 29.3609 0.12406
A/F Sinking fund 1.00000 0.47847 0.30505 0.21867 0.16709 0.13292 0.10869 0.09067 0.07650 0.06582 0.05695 0.04965 0.04357 0.03843 0.03406
P/A Present Worth 0.9174 1.7591 2.5313 3.2397 3.8897 4.4859 5.0330 5.5348 5.9952 6.4177 6.8052 7.1607 7.4869 7.7862 8.0607
- 2 3 4
0.8417 2.3860 4.5113 7.1110 10.0924 13.3746 16.8877 20.5711 24.3728 28.2481 32.1590 36.0731 39.9633 43.8069
0.4785 0.9426 1.3925 1.8282 2.2498 2.6574 3.0512 3.4312 3.7978 4.1510 4.4910 4.8182 5.1326 5.4346
6 7 8 9 10 11 12 13 14 15
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