A manufacturer of small plastic parts wants to install new equipn‘lent for Vendors for the new equipment have made two proposals” Mth’ne’A ‘5 C leapzn’ue However, an can produce more parts per year than Machine-A resulting in higher annua rev u-ires no such overhaul of Machine-B will be needed mid-way through the Project MaChme’A req fthe two overhaul. Machine-B also has a higher salvage value than Machine-A. .The detail: OMARR for the options are described in the following table. Management has determined that t 6 project is 12%.
I. Construct a cash flow diagram for each option.
II. Using the interest rate tables in your text, manually calculate the NPV for each option.
III. Based upon the NPV values, which machine is the better option? Does either option earn less than the required MARR? Explain your answers.
IV. Manually calculate the ERR for each option. Based upon the ERR values, which machine is the better option? Does either option earn less than the required MARR? Explain your answers.
V. Set up an Excel spreadsheet to check your results in parts ll & Ill. The spreadsheet should be appropriately formatted and labeled and easy for the reader to understand.
– constructing cash flow diagram.
– Calculating NPV
– Based on NPV which option is better? Does either option earn less than the required MARR?
– Calculate ERR. What option is better, Does either option earn less than the required MARR?
– setup excel sheet to check the results in parts II & III.