Costs of the new layout compared to the current layout

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Reference no: EM13818010

You are considering two alternative plant layouts, A1 and A2, to improve its current layout. The cash flows are shown below. The first costs represent the expenses of rearranging the current layout to the alternative new layout and the annual savings represent the reduction in the production costs of the new layout compared to the current layout. Using the internal rate of return as the decision criterion, what course of action do you recommend? Use MARR = 11%.

Data Year A1 A2

First Cost 0 -$110,000 -$115,000

Annual Savings 1 to ∞ $12,500 $15,000

Reference no: EM13818010

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