Basics of Engineering Economy 2nd Edition by Anthony Tarquin,Leland Blank

Exercise 6

Toro Company is expanding its U.S.-based plastic molding plant as it continues to transfer work from Juarez, Mexico contractors. The plant bought a $1.1 million precision injection molding machine to make plastic parts for Toro lawn mowers, trimmers, and snow blowers. The plant also spent $275,000 for three smaller plastic injection molding machines to make plastic parts for a new line of sprinkler systems. The plant expects to hire 13 people, including some engineers for the expansion. If the average loaded cost (i.e., including benefits) each employee is $100,000 per year, determine the annual worth of the new systems over a five-year planning period at an interest rate of 10% per year. Assume a 25% salvage value for the new equipment.