Charge of procuring a machine for your factory

Assignment Help Operation Management
Reference no: EM131270340

You are in charge of procuring a machine for your factory. The process will take about a year to complete and is a major investment in specialized equipment that will make or break the profitability of the company. It is expected the equipment will offer a 7-year advantage after which it will need to be replaced. There is a choice of the manufacturer of the equipment.

Manufacturer A will provide their model with a capacity of 1,000 widgets per year guarantee, and the equipment will require maintenance for 2weeks each year. The procurement cost will be $1 million in Korea. The delivery costs from Korea to the US factory will be $95,000. Total costs will be $10 per widget and the revenue will be $25 per widget.

The competitor Manufacturer B offers a model from Germany at a cost of $1.2 million, with a delivery cost to the US factory of $100,000 and a capacity of 1,150 widgets per year. The total costs for operation will be $9 per widget, and the machine will require maintenance every 2 years for 2weeks.

The demand for the widgets is expected to be 1,000 widgets per year for years one to three inclusive, and thereafter at 1,100 widgets per year for the remainder of the lifetime of the equipment. Maintenance cost will be $10,000 per week for Manufacturer A and $9,000 per week for Manufacturer B. The revenue and costs will escalate by 4% per year over the lifetime of the machine, as will the maintenance costs. The first maintenance cost is the expected value and escalation occurs after this first maintenance.

Complete a TCO analysis for these two machines. Show the NCF and the NPV for each of the machines. Questions:

Which machine would be purchased if the decision is made solely on price?

What is the NCF for each Machine?

What is the NPV for each machine if the discount factor is 15%?

Which of these machines should the company purchase based on a TCO analysis?

Is the investment value to the company worth undertaking if the WACC for the company is 13%?

Reference no: EM131270340

Questions Cloud

Write the expenses to a sequential access file : Please write the expenses to a sequential access file, where the expense data for each individual are contained on a single line, separated by comma.
Sample data support or inform economic decision : 1. How can sample data support or inform economic decision making within an organization? Can the sample data have errors or be problematic when making decisions? Provide an example.
Inform economic decision making within organization : 1. How can sample data support or inform economic decision making within an organization? Can the sample data have errors or be problematic when making decisions? Provide an example.
Explain unequal interest group representation : Define interest group formation and survival and discuss the barriers to interest group formation and survival. Explain unequal interest group representation. Some lobbying strategies and tactics are more effective than others: Discuss which ones are..
Charge of procuring a machine for your factory : You are in charge of procuring a machine for your factory. The process will take about a year to complete and is a major investment in specialized equipment that will make or break the profitability of the company. It is expected the equipment will o..
Budgeting for maximum production : A manufacturing firm has budgeted $60,000 per month for labor and materials.- how should the $60,000 be allocated to labor and materials in order to maximize N? What is the maximum N?
Taxes progressive or regressive : 1. Will the taxes have the desired effect (usually to reduce consumption)? 2. Will there be unexpected economic side-effects? 3. Are the taxes progressive or regressive? 4. Are the taxes primarily to influence behavior or to raise money?
Contribute to changes in the health care industry : Describe three important factors that contribute to changes in the health care industry. Propose three strategies that health care leaders can employ to lead their learning organizations in today's turbulent environment.
Best reflected in the price of the moisture plus line : Carmex Moisture Plus is priced between $2.49 and $2.99, a high price compared the $0.99 Carmex tube. Carmex managers estimated that female consumers would be willing to pay more for the sleek packaging, benefits, and additional ingredients found in t..

Reviews

Write a Review

 

Operation Management Questions & Answers

  Past when political leadership had called for such reforms

Social security reform is needed; however, in the past when political leadership had called for such reforms, there was a groundswell of opposition to any efforts at reforming this particular entitlement. Discuss why this might be so in America?

  Project management is the concept of an iron triangle

The main point of Project Management is the concept of an “ Iron Triangle” where you can do trade-off analysis between cost, schedule, and performance. Research this concept online. Provide a realistic example of a trade-off, where one of these three..

  Weighted moving average and exponential smoothing

Among simple moving average, weighted moving average, exponential smoothing, and linear regression, which forecasting technique would you consider the most accurate? In detail explain Why?

  Conversations with precision parts leaders and obtained

You have held conversations with Precision Part's leaders and obtained the following information, which you want to use in the development of a 4-year strategic management plan. PPQ Parts employees now number 5,000, and all are currently employed in ..

  Determine the new annual cost for hiring and training

A call center employs 1,100 agents. Every month 55 employees leave the company and 55 new employees are hired. a. How long on average does an agent work for this call center? Average working time months Suppose the cost of hiring and training a new a..

  What are some of the possible explanations

What are some of the possible explanations for not finding any causes? What should the manager do?

  Discuss why want to change the behaviors

Write a paper in which you discuss why you and the co-managers of your chain restaurants might want to change the behaviors you and theyengage in, given prevailing situation, subordinates, and the nature of the work being done

  Turnover-absenteeism-organizational citizenship behavior

We discussed in class several of the dependent variables that need to be considered when managing people (performance, job satisfaction, turnover, absenteeism, organizational citizenship behavior, deviant workplace behavior). Select two of these and ..

  Component of cultural intelligence and cultural intelligence

Which of the following statements about cultural intelligence is true? Which of the following is the last component of cultural intelligence?

  How much safety stock is required for a stock out risk

A house painting company uses, on average 70 cans of paint every week with a standard deviation of30 cans per week. Demand for cans of paint follows an approximately Normal distribution. Lead time for ordering more paint is consistently 1 week. How m..

  Find the range of feasibility for the rhs of constraint

Given the following linear programming problem with two non-negative variables (X1 and X2 ), find the range of feasibility for the RHS of constraint 2.

  Explain the concept of hierarchy of work

Explain the concept of hierarchy of work. Why is it useful in process design activities?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd