ABS specializes in repair and maintenance of industrial machines. One repair technician has been assigned to five identical grinding machines for repair and maintenance. The machine breaks down after about 20 hours of use, and breakdowns have a Poisson probability distribution. It takes 6 hours to repair a machine, and repair times follow an exponential distribution. Machine downtime costs the company $250 an hour, and the technician is paid $50 an hour. Determine the average number of machines working if the number of technicians is equal to two.
a. 3.72
b. 3.21
c. 2.32
d. 1.32
a. 3.72
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a. True b. False
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A company is considering the purchase of new equipment for $45,000. The projected annual net cash flows are $19,000. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The present value of an annuity of $1 for various periods follows: PeriodPresent value of an annuity of $1 at 12%10.892921.690132.4018 What is the net present value of this machine assuming all cash flows occur at year-end?
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