Question

14*-"About 1.2 million additional advanced robots are expected to be deployed in the U.S. by 2025, Boston Consulting Group says. Four industries will lead the shift — computer and electronics products; electrical equipment and appliances; transportation; and machinery — largely because more of their tasks can be automated and they deliver the biggest cost savings." (Davidson, Paul. “More robots coming to U.S. factories” USA TODAY, February 9, 2015) The systems (Robot X and Robot Y) shown below are under consideration for an improvement to an automated packaging process. Determine which should be selected on the basis of an Annual Worth Analysis using an interest rate of 10% per year. Robot X Robot Y First cost, $ –325,000 –250,000 Annual cost, $/year –4,000 –3,000 Salvage value, $ 40,000 25,000 Life, years 3 2 **The answers presented below were calculated using the appropriate factors from interest tables including all their decimal places**

Answer 1

MARR= 10%

Robot X

first cost = 325000, Annual O&M = 4000, Salvage value = 40000, life = 3 yrs

AW = -325000*(A/P,10%,3) - 4000 + 40000*(A/F,10%,3)

= -325000*0.402114 - 4000 + 40000*0.302114

= -122602.72

Robot Y

first cost = 250000, Annual O&M = 3000, Salvage value = 25000, life = 2 yrs

AW = -250000*(A/P,10%,2) - 3000 + 25000*(A/F,10%,2)

= -250000*0.576190 - 3000 + 25000*0.476190

= -135142.86

As Annual equivalent cost of robot X is lower, it should be selected