Answer to Question #257251 in Economics of Enterprise for moatasem

Question

A 600-ton press used to produce composite material fuel cell components for automobiles using proton exchange membrane (PEM) technology can reduce the weight of enclosure parts up to 75%. At MARR = 12% per year, calculate (a) capital recovery and (b) annual revenue required. Installed cost = $3.8 million n = 12 years, Salvage value = $250,000, Annual operating costs _ $350,000 to start increasing by $25,000 per year

Answer 1

Given;

Installed cost (P) =$3.8 million

n=12

Salvage value (S) = $250,000

Annual operating cost (A) = $350000

Operating cost I increases by(G) =$25000

MARR = 12%

a) The value of capital recovery

$CR=-P(A/P,i,n)+S(A/F,i,n)$

$= CR= -3800000(A/P,12\%,12)+250000(A/F,12\%,12)$ $=-\$3800000(0.16144)+\$250000(0.04144)$

$=-\$613472+\$10360=-\$603112$

The capital recovery is -$603112

b)Annual revenue required

$AW=CR+A$ of $AOC$

$=-\$603112-\$350000-\$25000(A/G,12\%,12)$

$=-\$603112-\$350000-\$25000(4.1897)$$=-\$603112-\$350000-\$104742.5 =-\$1057854.5$

The annual revenue required is -$1057854.5