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A machine having a first cost of $20,000 is expected to save $1500 in thefirst year of operation, and the savings should increase by $200 every year until (and including) the ninth year, thereafter the savings will decrease by $150 until (and including) the 16th year.

Using equivalent uniform annual worth, is this machine economical? Assume a MARR of 9%.

Respuesta :

Cricetus

Answer:

This machine is not economical. A further explanation is provided below.

Explanation:

Given:

First cost,

= $20,000

Saving,

= $1500

Increase by,

= $200

Decrease by,

= $150

Now,

The EUAW will be:

= [tex]-20000+1500(\frac{P}{F}, 9 \ percent,1 )+1700(\frac{P}{F}, 9 \ percent,8 )+1550(\frac{P}{F}, 9 \ percent,7 )[/tex]

= [tex]-20000+1500\times 0.9174+1700\times 0.5018+1550\times 0.5470[/tex]

= [tex]-20,000 + 1,371.1 + 856.06 + 847.85[/tex]

= [tex]-16,294.99[/tex] ($) negative

Thus this machine is not economical.

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