Question

An airport needs a modern material handling system for facilitating access to and from a busy maintenance hanger. A​ second-hand system will cost ​$75 comma 00075,000. A new system with improved technology can decrease labor hours by 2020​% compared to the used system. The new system will cost ​$150 comma 000150,000 to purchase and install. Both systems have a useful life of five years. The market value of the used system is expected to be ​$20 comma 00020,000 in five​ years, and the market value of the new system is anticipated to be ​$50 comma 00050,000 in five years. Current maintenance activity will require the used system to be operated 8 hours per day for 20 days per month. If labor costs ​$4040 per hour and the MARR is 11​% per​ month, which system should be​ recommended?

Answer 1

Answer:

The second system has a lower present worth therefore, more convinient.

Explanation:

-75,000 F0

20,000 in five

labor savings:

8 hours x $40 hours x 22 days = $7,040

PV of the salvage value

$\frac{Maturity}{(1 + rate)^{time} } = PV$  

Maturity  $20,000.0000

time  60.00

rate  0.01000

$\frac{20000}{(1 + 0.01)^{60} } = PV$  

PV   11,008.9923

PV of the labor cost:

$C \times \frac{1-(1+r)^{-time} }{rate} = PV$

C 7,040.00

time 60

rate 0.01

$7040 \times \frac{1-(1+0.01)^{-60} }{0.01} = PV$

PV $316,483.4704

Present worth

-75,000 cost

-316,483 labor cost

+  11,009 salvage value

-380.474

-150,000 F0

50,000 in five

labor savings:

8 hours x $40 x 22 days x (1 - 20%) = $5,632

PV of the resale value:

$\frac{Maturity}{(1 + rate)^{time} } = PV$  

Maturity  $50,000.0000

time  60.00

rate  0.01000

$\frac{50000}{(1 + 0.01)^{60} } = PV$  

PV   27,522.4808

PV of the labor cost

$C \times \frac{1-(1+r)^{-time} }{rate} = PV$

C 5,632.00

time 60

rate 0.01

$5632 \times \frac{1-(1+0.01)^{-60} }{0.01} = PV$

PV $253,186.7763

Present worth

-150,000

-253,187

+27,522

-375.665