Question

VYS Inc will purchase a new machine that costs $30,000 and is expected to last 12...

VYS Inc will purchase a new machine that costs $30,000 and is expected to last 12 years with a salvage value of $3,000. Annual operating expenses for first year is $9,000 and increase by $200 each year thereafter. Annual income is expected to be $12,000 per year. If VYS’s MARR is 10%, determine the NFW of the machine purchase.

Homework Answers

Answer #1

Ans. The new present worth of the cashflows at 10% interest rate is,

NPW = -30000 + (12000 -9000)/(1+0.10) + (12000-9200)*(1+0.10)^2 + (12000-9400)*(1+0.10)^3 + (12000-9600)*(1+0.10)^4 + (12000-9800)*(1+0.10)^5 + (12000-10000)*(1+0.10)^6 + (12000-10200)*(1+0.10)^7  + (12000-10400)*(1+0.10)^8 + (12000-10600)*(1+0.10)^9  + (12000-10800)*(1+0.10)^10 + (12000-11000)*(1+0.10)^11 + (12000-11200 + 3000)*(1+0.10)^2

=> NPW = -$13833.02

Thus, net future worth at 9% interest rate,

NFW = NPW*(P/F, 9%, 12) = -$39048.2814

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