Ridgley Custom Metal Products

Problem: 1) Ridgley Custom Metal Products (RCMP) must purchase a new tube bender. RCMP’s MARR is 11%. They are considering two models.

Model

First Cost

Economic Life

Yearly Net Savings

Salvage Value

T

$100000

5 years

$50000

$20000

A

$150000

5 years

$60000

$30000

a) Using the present worth method, which tube bender should they buy?

b) RCMP has discovered a third alternative, which has been added to the table. Now which tube bender should they buy?

Model

First Cost

Economic Life

Yearly Net Savings

Salvage Value

T

$100000

5 years

$50000

$20000

A

$150000

5 years

$60000

$30000

X

$200000

3 years

$75000

$100000

2) RCMP (pertaining to the first problem in part b) can forecast demand for its products for only three years in advance. The salvage value after three years is $40000 for model T and $80000 for model A. Using the study period method, which of the three alternatives is best?

Leave a Reply

Your email address will not be published. Required fields are marked *