ABC Beverage, LLC purchases its 355-ml cans in large bulk from Wald-China Can Corporation. The finish on the anodized aluminum surface is produced by mechanical finishing technologies called brushing or bead blasting. Engineers at Wald are switching to more efficient, faster, and cheaper machines to supply ABC. Use the estimates and MARR = 8% per year to select between the two alternatives. Brush alternative: P = $?400,000; n = 10 years; S = $50,000; non-labor AOC = $?60,000 in year 1, decreasing by $5000 annually starting in year 2 Bead blasting alternative: P = $?400,000; n is large, assume permanent; no salvage; non- labor AOC = $?70,000 per year
What will be an ideal response?
AW brush = -400,000(A/P,8%,10) + 50,000(A/F,8%,10)
- [60,000 - 5000(A/G,8%,10)]
= -400,000(0.14903) + 50,000(0.06903) – 60,000 + 5000(3.8713)
= $-96,804
AW blast = -400,000(0.08) – 70,000
= $-102,000
Select brush alternative
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