An industrial engineer is considering two robots for purchase bya fiber optic manufacturing company....

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Accounting

An industrial engineer is considering two robots for purchase bya fiber optic manufacturing company. Robot X will have a first costof $125,000, an annual maintenance and operation (M&O) cost of$40,000, and a $60,000 salvage value. Robot Y will have a firstcost of $145,000, an annual M&O cost of $33,000, and a $65,000salvage value. Which should be selected on the basis of an annualworth comparison of 9% per year? Use a 3-year study period.
Interest Rate 9%
Robot X Cash Flows Robot Y Cash Flows
Year End Cash Flow Present Value Year End Cash Flow Present Value
0 0
1 1
2 2
3 3
Total PV Total PV
Annual Worth for Robot X Annual Worth for Robot Y
-$71,078.56 -$70,454.38
Which model should the company buy?

Answer & Explanation Solved by verified expert

4.5 Ratings (795 Votes)

Robot X Years Net cash Outflow PV Factor9 Present value 0 Cost of machin 125000 1000 12500000 1 MO Cost 40000 091743 3669725 2 MO Cost 40000 084168 See Answer

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In: AccountingAn industrial engineer is considering two robots for purchase bya fiber optic manufacturing company. Robot...An industrial engineer is considering two robots for purchase bya fiber optic manufacturing company. Robot X will have a first costof $125,000, an annual maintenance and operation (M&O) cost of$40,000, and a $60,000 salvage value. Robot Y will have a firstcost of $145,000, an annual M&O cost of $33,000, and a $65,000salvage value. Which should be selected on the basis of an annualworth comparison of 9% per year? Use a 3-year study period.Interest Rate9%Robot X Cash FlowsRobot Y Cash FlowsYear EndCash FlowPresent ValueYear EndCash FlowPresent Value00112233Total PVTotal PVAnnual Worth for Robot XAnnual Worth for Robot Y-$71,078.56-$70,454.38Which model should the company buy?

Interest Rate	9%

Robot X Cash Flows			Robot Y Cash Flows
Year End	Cash Flow	Present Value	Year End	Cash Flow	Present Value
0			0
1			1
2			2
3			3
	Total PV			Total PV

Annual Worth for Robot X			Annual Worth for Robot Y
		-$71,078.56			-$70,454.38
Which model should the company buy?