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AutoFoundry has contacted Centrifugal Casting Company about

Paper help Economics AutoFoundry has contacted Centrifugal Casting Company about

Economics

AutoFoundry has contacted Centrifugal Casting Company about

AutoFoundry has contacted Centrifugal Casting Company about the purchase of machines for the product… Show more AutoFoundry has contacted Centrifugal Casting Company about the purchase of machines for the production of (1) Babbitt bearings, and (2) diesel cylinder liners (engine sleeves). The cost of the machines prohibits AutoFoundry from purchasing both, so they decide to base their selection on which machine will provide the greatest net income on a ‘‘today’’ basis (also known later as a present worth basis). The bearing machine has a life of 5 years, after which it is expected to be replaced. It has ‘‘today’’ costs (considering first cost and 5 years of operating cost, maintenance, etc.) of $460,000 and provides new revenues over the 5 years of $730,000 in today’s dollars. The cylinder liner machine has a life of 9 years, with ‘‘today’’ costs and new revenues over the 9-year life of $650,000 and $990,000, respectively. What would you recommend that AutoFoundry do? • Show less

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