## Related questions with answers

The Briggs and Stratton Commercial Division designs and manufactures small engines for golf turf maintenance equipment. A robotics-based testing system with support equipment will ensure that their new signature guarantee program entitled “Always Insta-Start” does indeed work for every engine produced. (a) Compare the annual worth values of the two systems at MARR = 10% per year. Select the better system. (b) Determine the salvage value for the Push System that will make the company indifferent between the two systems.

$\begin{array}{lrr} & \text { Pull System } & \text { Push System } \\ \hline \text { Equipment first cost, } \$ & -1,500,000 & -2,250,000 \\ \text { AOC, } \$ \text { per year } & -700,000 & -600,000 \\ \text { Salvage value, } \$ & 100,000 & 50,000 \\ \text { Estimated life, years } & 8 & 8 \\ \hline \end{array}$

Solution

Verifieda) AW values for both systems:

We need to take a look at the $\textbf{Table 15}$, factors: $\textbf{A/P, A/F}$ for $\textbf{10\%}$, $\textbf{n=8}$.

$\begin{align*} \text{AW}_{\text{pull}} &=-\text{first cost}\times(A/P, 10\%, 8)-\text{AOC}+\text{salvage value}\times(A/F, 10\%, 8)\\[12pt] &=-1{,}500{,}000(0.18744)-700{,}000+100{,}000(0.08744)\\[7pt] &= \boxed{\$-972{,}416}\\ \end{align*}$

$\begin{align*} \text{AW}_{\text{push}} &=-\text{first cost}\times(A/P, 10\%, 8)-\text{AOC}+\text{salvage value}\times(A/F, 10\%, 8)\\[12pt] &=-2{,}250{,}000(0.18744)-600{,}000+50{,}000(0.08744)\\[7pt] &= \boxed{\$-1{,}017{,}368}\\ \end{align*}$

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