Question 10.P.10: A company decides to automate a process by installing a mach......

Schaum’s Outline of Engineering Economics [1215911]

A company decides to automate a process by installing a machine that costs $8000 and is expected to save $2500 per year. Discuss the wisdom of this decision, if the economic life of the machine is 10 years, at which time it has a $2000 salvage value, and if the MARR is 15%.

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The present worth of the decision is (costs counted negative):

PW = -$8000 + $2000(P/F, 15%, 10) + $2500(P/A, 15%, 10) = +$5041.38

that is, the company can expect net savings of $5041.38 (today’s dollars) over the next 10 years.

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