Reference no: EM133177999
Question - Jameson inc. plans on purchasing a new metal melter for its line of steel. There are two choices of supplier: Metal Inc and Steek Ubc. Their proposals are as follows: Metal Inc Expected life 8 years First cost $250,000 Maintenance $15,000/year + $0.07/unit t Labour $1.30/unit Other costs $7,300/year+$1.05/unit Salvage Value $6,500. Steel Inc Expected Value 12 years, FIrst cost $375000, Maintenance $22,000/ year + $0.02/unit, labour $0.75/unit, other costs $17,500/ year + $0.7/unit and Salvage value is $23000.
Management thinks they would be able to sell 10,000 Steel per year based on current demand. If the demand increases, sales may be as high as 50,000 Steel a year. Jameson inc. uses an MARR of 12% for equipment projects.
a) Who is the preferred supplier if sales are 20,000 units per year?
b) Who is the preferred supplier if sales are 230,000 units per year?
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