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A new semi-automatic machine costs $ 80,000 and is expected to generate revenues of $ 40,000...

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Mechanical Engineering

A new semi-automatic machine costs $ 80,000 and is expected togenerate revenues of $ 40,000 per year for 6 years. It will cost $25,000 per year to operate the machine. At the end of 6 years, themachine will have a salvage value of $ 10,000. Evaluate theinvestment in this machine using all four methods (payback period,present worth, uniform annual cost (UAC), and rate of return).Neglect the salvage value for the payback period method and therate of return methods.

Suppose, a completely automated machine is available for $140,000. The annual operating cost is $ 10,000 and the service lifeis expected to be 7 years. The salvage value of this equipment atthe end of this period is $ 25,000. Revenues from this alternativetoo are $ 50,000 per year. Use the UAC method to compare thisinvestment alternative with the semi-automatic machineinvestment.

Use a rate of return of 15 % where necessary.

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