Solve using Excel - Holly Farms is considering two environmental chambers to acc
ID: 2709501 • Letter: S
Question
Solve using Excel - Holly Farms is considering two environmental chambers to accomplish detailed laboratory confirmations of on-line bacteria tests in chicken meat for the presence of E. coli 0157:H7 and Listeria monocytogenes. A.) If this project will last for 6 years and i=10% per year, perform an AW method evaluation to determine which chamber is more economical
Chamber D103 - Installed cost $-400,000 Annual Operating Cost $-4,000 per year Savlage Value@ 10% of P $40,000 Life 3 years
Chamber 490G-Installed cost $-250,000 Annual operating cost $ -3,000 $ per year Salvage value @ 10% of P $ 25,000 Life 2 years
Explanation / Answer
Since the equated annual cost of Chamber 490G is lower, it ould be more economical. Equated annual cost is applied due to twodifferent life for the projects.
Chamber D103 Chamber 490G a Cost -400000 -250000 b Life 3 2 c Salvage Value 40000 25000 d Operating Cost per year -4000 -3000 e Discount rate 10% 10% f Cumulative PV at 10% for 3 years 2.4869 1.7355 g Cumulative PV at 10% for 2 years h Present Value of operating cash flows (d*f) -9947.6 -5206.5 i PV of Terminal Cash Flow 30052.59204 20661.15702 j Net Present Value (i + h + a) -379895.008 -234545.343 k Equated Annual Cost (j/b) -126631.6693 -117272.6715