There are several mutually exclusive ways Grazemont Dairy can meet a requirement for a filling machine for its creamer line. One choice is to buy a machine. This would cost $65,000 and last for six years with a salvage value of $10,000. Alternatively, it could contract with a packaging supplier to get a free machine. In this case, the extra costs for packaging supplies would amount to $15,000 per year over the six-year life (after which the supplier gets the machine back with no salvage value for Grazemont). The third alternative is to buy a used machine for $30,000 with zero salvage value after six years. The used machine has extra maintenance costs of $3000 in the first year, increasing by $2500 per year. In all cases, there are installation costs of $5000 and revenues of $18,000 per year. Using the IRR method, if possible, determine which is the best alternative. The MARR is 10 percent. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 10%. Considering the alternatives in the order of lowest first cost, the best option is (Type an integer or decimal rounded to two decimal places as needed. Use an which has an incremental rate of return of percent. used.) to buy the new machine, to receive the free machine, the do-nothing option, to buy the used machine,
There are several mutually exclusive ways Grazemont Dairy can meet a requirement for a filling machine for its creamer line. One choice is to buy a machine. This would cost $65,000 and last for six years with a salvage value of $10,000. Alternatively, it could contract with a packaging supplier to get a free machine. In this case, the extra costs for packaging supplies would amount to $15,000 per year over the six-year life (after which the supplier gets the machine back with no salvage value for Grazemont). The third alternative is to buy a used machine for $30,000 with zero salvage value after six years. The used machine has extra maintenance costs of $3000 in the first year, increasing by $2500 per year. In all cases, there are installation costs of $5000 and revenues of $18,000 per year. Using the IRR method, if possible, determine which is the best alternative. The MARR is 10 percent. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 10%. Considering the alternatives in the order of lowest first cost, the best option is (Type an integer or decimal rounded to two decimal places as needed. Use an which has an incremental rate of return of percent. used.) to buy the new machine, to receive the free machine, the do-nothing option, to buy the used machine,
College Algebra (MindTap Course List)
12th Edition
ISBN:9781305652231
Author:R. David Gustafson, Jeff Hughes
Publisher:R. David Gustafson, Jeff Hughes
Chapter6: Linear Systems
Section6.8: Linear Programming
Problem 5SC: If during the following year it is predicted that each comedy skit will generate 30 thousand and...
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Transcribed Image Text:There are several mutually exclusive ways Grazemont Dairy can meet a requirement for a filling machine for its creamer line. One choice is to buy a machine. This
would cost $65,000 and last for six years with a salvage value of $10,000. Alternatively, it could contract with a packaging supplier to get a free machine. In this
case, the extra costs for packaging supplies would amount to $15,000 per year over the six-year life (after which the supplier gets the machine back with no salvage
value for Grazemont). The third alternative is to buy a used machine for $30,000 with zero salvage value after six years. The used machine has extra maintenance
costs of $3000 in the first year, increasing by $2500 per year. In all cases, there are installation costs of $5000 and revenues of $18,000 per year. Using the IRR
method, if possible, determine which is the best alternative. The MARR is 10 percent.
Click the icon to view the table of compound interest factors for discrete compounding periods when i = 10%.
Considering the alternatives in the order of lowest first cost, the best option is
(Type an integer or decimal rounded to two decimal places as needed. Use an
which has an incremental rate of return of percent.
used.)
to buy the new machine,
to receive the free machine,
the do-nothing option,
to buy the used machine,
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