How much carpet must be re-manufactured annually

Reference no: EM13214330

Each year in the United States nearly 5 billion pounds of discarded carpet end up in land fills. In response to this situation, the carpet manufacturer has decided to start a take-back program whereby obsolete carpet is reclaimed at the end of its useful life (about 7 years). The manufactured carpet will then be recycled into the company's supply chain. The out-of-pocket (variable) cost of recycling is $1.00 per square yard of carpet, and the re-manufactured carpet can be sold for $3.00 per square yard. If the recycling equipment costs $1 million and has no market value at the end of its eight- year life, how much carpet must be re-manufactured annually to make this a profitable undertaking? The company;s MARR is 15% per year.

Reference no: EM13214330

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