FINTEST2-5 - Cl Exam Number 2(12 Points Two different kinds...

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Unformatted text preview: Cl. Exam Number 2. (12 Points) Two different kinds of bits are being considered for a machine tool. 0 Bit A costs $1000 and has a life of five years. The energy cost associated with using this bit is $300 per year. I Bit B costs a $2000 and has a life of ten years. The energy cost for this bit is $100 in the first year. Energy costs increases by $30 each year afier the first. ($130 in second year, $160 in third year, etc.) You must choose one of the options. The minimum acceptable rate of retum is 16% a year. Use the factor table and the present worth method to make the most economic selection. Show the formulas used. n FfP P/F A/F A/P FIA P/A A/G P/G E- WEE-— MM 2 02448 mm! 6. 8. mm: —IEEEI 3.68135 m 5.5858 ——__EIIIII 3.68474 7.63801 _EEEEl-_m .03857 360% WWW MW— —_——_—IEEBJ- —m “m -mmm MERE! 15 mm Use a 10 year study period. NPW(A) = 1000 + 1000(P/F,-.16. 5) + 300(P/A, .16, 10) NPW(A) = 1000 + 1000(0.4761) + 300(4.8332) NPW(A) =2926 il Use a 10 year study period. NPW(B} = 2000 + 100(P/A, .16. 10) + 30(P/G, .16, 10) NPW(B) = 2000 + 100(4.8332) + 30(16.0399) NPW(B) = 2965 Choose Bit A ...
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