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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.

 Pull System  Push System  Equipment first cost, $1,500,0002,250,000 AOC, $ per year 700,000600,000 Salvage value, $100,00050,000 Estimated life, years 88\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}

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Answered 2 years ago
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a) AW values for both systems:

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

AWpull=first cost×(A/P,10%,8)AOC+salvage value×(A/F,10%,8)=1,500,000(0.18744)700,000+100,000(0.08744)=$972,416\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*}

AWpush=first cost×(A/P,10%,8)AOC+salvage value×(A/F,10%,8)=2,250,000(0.18744)600,000+50,000(0.08744)=$1,017,368\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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