1 EconomicsUTeM Sdn Bhd is planning to expand its range of automotive components by producing severalsheet metal parts. Several combinations of new machine and workers could serve to fulfil thisnew agenda. There are two final proposal identified by the engineering department.Both proposals are:Machining Centre 1: New machining centre with two workers.The new machining centre will cost RM150,000 and installation cost is RM20,000. Themaintenance cost to maintain the machining centre is RM8,000 per year start at year 3.Machining Centre 2: New machining centre with an automatic pallet changer and oneworker.Machining centre 2 option will use the same machining centre as option 1 but adding theautomatic pallet changer will cost them RM40,000 and additional installation cost RM 7,000.This proposal requires maintenance RM12,000 per year.Each of these proposal incurs different costs and revenues. The first year net revenue will beRM40,000 per year for both proposal, but the usage of automatic pallet changer in machiningcentre 2 is expected increase the net revenue by 13% per year. The salary of worker is RM1,500per month.Recommend the best proposal using Present Worth Analysis over the five-year study periodwith Minimum Attractive Rate of Return set by the UTeM Sdn Bhd at 8% per year.

There are two alternatives : Machine Centre 1 & Machine Centre 2 Machine Centre 1 - Initial…

Economics UTeM Sdn Bhd is planning to expand its range of automotive components by producing several sheet metal parts. Several combinations of new machine and workers could serve to fulfil this new agenda. There are two final proposal identified by the engineering department. Both proposals are: Machining Centre 1: New machining centre with two workers.

Economics UTeM Sdn Bhd is planning to expand its range of automotive components by producing several sheet metal parts. Several combinations of new machine and workers could serve to fulfil this new agenda. There are two final proposal identified by the engineering department. Both proposals are: Machining Centre 1: New machining centre with two workers.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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