The Toro Company is expanding its El Paso, Texas plastic molding plant as it continues to transfer work from Juarez, Mexico contractors. The plant bought a $1.1 million precision injection molding machine to make plastic parts for Toro lawn mowers, trimmers, and snow blowers. The plant also spent $275,000 for three smaller plastic injection molding machines to make plastic parts for a new line of sprinkler systems. The plant expects to hire 13 people, including some engineers for the expansion. If the average loaded cost (i.e., including benefits) of each employee is $100,000 per year, determine the annual worth of the new systems and employees over a 5-year study period. Use an investment return rate of 10% per year, and assume a 25% salvage value for the new equipment. Solve using
factors and a spreadsheet function.
What will be an ideal response?
Factors: In $ million units
AW = - (1.1 + 0.275)(A/P,10%,5) – 13(0.1) + (0.25)(1.1 + 0.275)(A/F,10%,5)
= - 1.375(0.26380) – 1.3 + (0.25)(1.375)(0.16380)
= $-1.606 ($-1,606,420)
Function: = - PMT(10%,5,-1375000,343750) – 1300000 displays $-1,606,416
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