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    801 E - Campus Mod 2 HWK 02

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    Adefemi
    This document contains an economics homework assignment with questions about present worth analysis, annual cash flow analysis, and equivalence for repeated cash flows. It includes 4 multi-part questions analyzing alternatives for lean process lines and machines, considering initial costs, maintenance costs, labor costs, benefits, salvage values, and useful lives over multiple years to determine the preferred alternative based on net present or annual cash flows using interest rates of 10-15%.

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    801 E - Campus Mod 2 HWK 02

    Uploaded by

    Adefemi
    85 views2 pages
    This document contains an economics homework assignment with questions about present worth analysis, annual cash flow analysis, and equivalence for repeated cash flows. It includes 4 multi-part questions analyzing alternatives for lean process lines and machines, considering initial costs, maintenance costs, labor costs, benefits, salvage values, and useful lives over multiple years to determine the preferred alternative based on net present or annual cash flows using interest rates of 10-15%.

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    Project management Homework 02

    Original Title

    801 E_Campus Mod 2 Hwk 02

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    This document contains an economics homework assignment with questions about present worth analysis, annual cash flow analysis, and equivalence for repeated cash flows. It includes 4 multi-part questions analyzing alternatives for lean process lines and machines, considering initial costs, maintenance costs, labor costs, benefits, salvage values, and useful lives over multiple years to determine the preferred alternative based on net present or annual cash flows using interest rates of 10-15%.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    85 views2 pages

    801 E - Campus Mod 2 HWK 02

    Uploaded by

    Adefemi
    This document contains an economics homework assignment with questions about present worth analysis, annual cash flow analysis, and equivalence for repeated cash flows. It includes 4 multi-part questions analyzing alternatives for lean process lines and machines, considering initial costs, maintenance costs, labor costs, benefits, salvage values, and useful lives over multiple years to determine the preferred alternative based on net present or annual cash flows using interest rates of 10-15%.

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    AEM 801: Economics for Lean Operations

    Homework Module 2
    Chapter 4: Equivalence for Repeated Cash Flows
    Chapter 5: Present Worth Analysis
    Chapter 6: Annual Cash Flow Analysis
    Name: _________________________________
    CHAPTER 4: EQUIVALENCE FOR REPEATED CASH FLOWS
    1. [5 points] If i = 10%, for what value of B is the present value = 0?

    2. [5 points] These cash flow transactions are said to be equivalent in terms of economic
    desirability at an interest rate of 15% compounded annually. Determine the unknown value of
    A?

    10/15/2015

    AEM 801: Economics for Lean Operations


    Homework Module 2
    Chapter 4: Equivalence for Repeated Cash Flows
    Chapter 5: Present Worth Analysis
    Chapter 6: Annual Cash Flow Analysis

    CHAPTER 5: PRESENT WORTH ANALYSIS


    3. [10 points] An industrial engineer has been studying a lean process line to determine if the
    company should switch from a labor-intensive line to a more automated system. If the
    company wants to earn at least 12% over a 10-year planning horizon, given the following
    cash flow estimates and using a Present Worth Analysis, which alternative is preferred?
    Labor Intensive Line

    Automated Line

    Initial Cost

    $ 0

    $ 100,000

    Installation Cost

    $ 0

    $ 100,000

    1st-Year Maintenance Costs

    $ 2,000

    $ 15,000

    Annual Increase in Maintenance Costs

    $ 250

    $ 500

    1st-Year Labor Costs

    $ 95,000

    $ 50,000

    Annual Increase in Labor Costs


    Salvage Value (End of Year 10)

    3%
    $ 10,000

    3%
    $ 20,000

    CHAPTER 6: ANNUAL CASH FLOW ANALYSIS


    4. [10 points] An engineer has been studying a lean process line to determine if the company
    should switch from one machine (Machine A) to another (Machine B). Assume an interest
    rate of 10%. Use annual cash flow analysis to determine which machine should be chosen.

    10/15/2015

    Machine A

    Machine B

    First Cost

    $ 20,000

    $ 30,000

    Maintenance and Operating Costs

    $ 2,000

    $ 500

    Annual Benefit

    $ 10,000

    $ 15,000

    Salvage Value

    $ 5,000

    $ 7,500

    Useful Life (years)

    11

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