4tazaouiamine1r
02.04.2021 •
Business
A manufacturer, whose MARR is 8%, is considering two alternative plant layouts, A1 and A2. The first cost represent the expenses of rearranging the current layout to the alternative new layout and the annual savings represent the reduction in the production costs of the new layout compared to the current layout. Using the internal rate of return as the decision criterion, what course of action do you recommend? Year A1 A2 First Cost 0 $120,000 $130,000 Annual Savings 1 to infinity $11,000 $14,500
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Ответ:
Choose Alternative : A2
Explanation:
MARR = 8%
Alternatives : A1 and A2
Year A1 A2
First cost 0 $120,000 $130,000
Annual savings 1 to infinity $11,000 $14,500
determine what course of action to recommend
Incremental rate of return for infinite project ( r ) i.e. from A2 - A1
Apply this formula below to resolve the question
-first cost of more expensive alternative - (-first cost of less expensive alternative) + savings of more expensive/r - savings of less expensive/r = 0
= - 130,000 - ( - 120,000 ) + 14500 / r - 11,000 / r = 0
= -130,000 + 120,000 = 11,000 / r - 14,500 / r
= - 10,000 = - 3500 / r
∴ r = 3500 / 10000 = 0.35 = 35%
The incremental rate of return from A2 - A1 = 35% which is > MARR ( 8%)
hence choose alternative A2
Ответ:
responsibility
Explanation:
hope it helps..