| Question |
Poly-Chem Plastics is considering two types of injection molding machines-hydraulic and electric. The hydraulic press (HP) will have a first cost of $600,000, annual costs of $200,000, and a of $70,000 after 5 years. Electric machine technology (EMT) will have a first cost of $800,000, annual costs of $150,000, and a of $130,000 after 5 years. (a) Use an AW-based rate of return equation to determine the ROR on the increment of investment between the two. (b) Plot the AW versus i graph for each alternative’s cash flows, and utilize it to determine the largest that will justify the EMT extra investment of $200,000. |
