A company called PB is looking to buy one of two automated systems for its watch component production. The two methods have been costed as shown below. The difference is in the approach to the structure and utility requirements. The Provide “Now” alternative has all the utility, and facility costs for the current and expansion equipment. The “Postpone” alternative literally postpones these costs till later. Use a PW analysis and calculate the value of T for a breakeven. Use a MARR of 9%!
Item Now Postpone
First unit 1,400,000 1,250,000
Second Unit 850,000 at time T 1,150,000 at time T