An engineer- to- order manufacturer is considering purchasing new equipment for its film adhesive assembly. The initial cost of the equipment is $12,100 and annual maintenance costs are estimated to be $185,000 per year. Annual operating costs will be in direct proportion to the hours of use at $12 per hour. The expected annual revenue is $220,000 per year. The equipment has a salvage value of $500 at the end of 5 years. What is the maximum annual hours of use for which the equipment is economically justified? Use straight- line depreciation, an effective tax rate of 39%, and an after- tax MARR of 16% per year.

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The Answer of An engineer- to- order manufacturer is considering purchasing new equipment for its film adhesive assembly. The initial cost of the equipment is $12,100 and annual maintenance costs are estimated to be $185,000 per year. Annual operating costs will be in direct proportion to the hours of use at $12 per hour. The expected annual revenue is $220,000 per year. The equipment has a salvage value of $500 at the end of 5 years. What is the maximum annual hours of use for which the equipment is economically justified? Use straight- line depreciation, an effective tax rate of 39%, and an after- tax MARR of 16% per year.

An Engineer- To- Order Manufacturer Is Considering Purchasing New Equipment