Replacement decision for printing machine

Unit
S.
no
1

Defender
Initial investment cost for printing machine 2
years back

Expected machine life

3
4
5

Remaining life
Expected salvage value
Repair cost for last year

6
7
8
9
10

Present operating cost

Salvage value deducted to
Book value of machine
Market value of machine
Interest rate

$
Year
s
Year
s
$
$
$/ye
ar
$
$
$
%

20000

$
year
s
$
$
%

15000

5
3
5000
5000
8000
2500
14693
10000
0.12

Challenger
11

Investment cost

12
13
14
15

Useful life
3
Annual Operating cost
6000
Salvage value of new machine
5500
Interest rate
0.12
Option 1 : Keep the defender
Annual operating cost for next three years
$
8000
salvage value after three years
$
2500
Present worth of defender is sum of present worth of future salvage
value and present worth of future operating cost expenditures
Rs.
Present worth of future salvage value
$
-1,779.45
Present worth of future operating cost
Rs.
expenditure
$
-19,214.65
Rs.
Present worth of defender
$
17,435.20
Rs.
Annual equivalent cost for present worth
$
-7,259.13
Option 2 : Adopt new machine (challenger)
Defender can be sold for
$
10000
Cost of challenger
$
15000
Initial combines cash flow for this option
$
5000

Present worth of new machine is sum of present worth of future

salvage value and present worth of future operating cost
expenditures
Present worth of future salvage value
Present worth of future operating cost
expenditure

Present worth

Annual equivalent cost for present worth

Annual difference between defender and
challenger

Rs.
-3,914.79
Rs.
-14,410.99
Rs.
15,496.20
Rs.
-6,451.83
Rs.
807.30

Result
The annual equivalent cost for defender is more than
challenger with a difference of $807.20 which makes the
replacement decision in favour of challenger

Anova: Single Factor

SUMMARY
Groups

Coun
t

Mach 1

Mach 2

Mach 3

Sum
124.6
5
113.0
5
102.9
5

Avera
ge

Varia
nce

24.93

1.0648

22.61

0.778

20.59

0.9205

MS
23.58
2
0.921
1

ANOVA
Source of Variation
Between Groups
Within Groups

Total

SS
47.16
4
11.05
32
58.21
72

df
2
12

14

25.602

Pvalue
4.68E05

F crit
3.8852
94

Anova: Two-Factor With

Replication
SUMMARY

B1

B2

Total

A1

Count
Sum
Average

2
64
32

2
74
37

Variance

32

Count
Sum
Average

2
80
40

2
94
47

Variance

18

18

4
144
36
30

4
168
42
50

4
138
34.5
21.666
67

A2

4
174
43.5
28.333
33

Total

Count
Sum
Average
Variance

ANOVA
Source of Variation
Sample

SS

df

MS

162

162

Columns

72

72

Interaction
Within

2
76

1
4

2
19

312

Total

F
8.5263
16
3.7894
74
0.1052
63

Pvalue
0.0432
44
0.1234
3
0.7618
61

F crit
7.7086
47
7.7086
47
7.7086
47

Models with Uncertainty (Stochastic Modeling)

Standard deviation, %
Mean, %
Random
number

S.No
1

0.1531

0.4018

0.2910

0.0369

0.4346

6
7
8

0.2788
0.5496
0.8092

0.2110

10
11
12
13
14

0.3240
0.4649
0.5974
0.6046
0.7678

15

0.0479

16

0.3896

17
18

0.2718
0.8410

19
20
21
22

0.4304
0.8505
0.6820
0.9201

23

0.0682

24
25
26

0.1551
0.9851
0.7213

Probabili
ty

3
25
Z value

-0.3469 1.023106619
-0.0982 0.248723381
-0.2090 0.550581797
-0.4631 1.787589402
-0.0654 0.164676225
-0.2212 0.586552732
0.0496 0.124541536
0.3092 0.875017529
-0.2890 0.803105732
-0.1760 0.456594768
-0.0351 -0.08801678
0.0974 0.246733641
0.1046 0.265362638
0.2678 0.731661431
-0.4521 1.665098043
-0.1104 0.280243178
-0.2282 0.607462492
0.3410 0.998444456
-0.0696 0.175425014
0.3505 1.038393544
0.1820
0.47334323
0.4201 1.405664996
-0.4318 1.489449337
-0.3449 1.014730116
0.4851
2.17155961
0.2213 0.586853353

X = Z +
mean

System
Capacity

21.93068014

1.72

24.25382986

1.77

23.34825461

1.75

19.63723179

1.67

24.50597133

1.77

23.2403418
25.37362461
27.62505259

1.75
1.80
1.80

22.5906828

1.73

23.6302157
24.73594966
25.74020092
25.79608791
27.19498429

1.75
1.78
1.80
1.80
1.80

20.00470587

1.68

24.15927046

1.77

23.17761252
27.99533337

1.74
1.80

24.47372496
28.11518063
26.42002969
29.21699499

1.77
1.80
1.80
1.80

20.53165199

1.69

21.95580965
31.51467883
26.76056006

1.72
1.80
1.80

27
28
29
30
31

0.0312
0.9842
0.5779
0.5860
0.7035

-0.4688
0.4842
0.0779
0.0860
0.2035

32
33

0.4244
0.5724

-0.0756
0.0724

34
35

0.1381
0.9230

-0.3619
0.4230

36

0.4983

-0.0017

37
38
39
40

0.0211
0.6987
0.6465
0.6234

-0.4789
0.1987
0.1465
0.1234

41
42
43
44

0.2194
0.9277
0.7482
0.7234

-0.2806
0.4277
0.2482
0.2234

45

0.0375

-0.4625

46
47

0.0935
0.5383

-0.4065
0.0383

48
49
50
985
986
987
988

0.4770
0.3090
0.7922
0.8671
0.8492
0.7028
0.7442

-0.0230
-0.1910
0.2922
0.3671
0.3492
0.2028
0.2442

989
990

0.0942
0.3269

-0.4058
-0.1731

1.863251356
2.148532604
0.19660865
0.217231044
0.534548916
0.190537642
0.182606128
1.089002677
1.425700114
0.004337413
2.030576407
0.520728216
0.375980607
0.314370406
0.774227706
1.458800607
0.66869368
0.592904477
1.780320464
1.319287176
0.096048156
0.057687737
-0.49873316
0.814123728
1.112763637
1.033128467
0.532391226
0.656210258
1.315196222
-

19.41024593
31.44559781
25.58982595
25.65169313
26.60364675

1.66
1.80
1.80
1.80
1.80

24.42838707
25.54781838

1.77
1.80

21.73299197
29.27710034

1.71
1.80

24.98698776

1.79

18.90827078
26.56218465
26.12794182
25.94311122

1.65
1.80
1.80
1.80

22.67731688
29.37640182
27.00608104
26.77871343

1.73
1.80
1.80
1.80

19.65903861

1.67

21.04213847
25.28814447

1.70
1.79

24.82693679
23.50380052
27.44237118
28.33829091
28.0993854
26.59717368
26.96863077

1.78
1.75
1.80

21.05441133
23.65480031

1.80
1.80
1.80
1.80
1.70
1.76

991

0.6432

992
993
994
995

0.4517
0.6855
0.9029
0.8975

996
997

0.0526
0.6576

998
999

0.1597
0.7453

1000
1001

0.2702
0.7840

0.448399897
0.1432 0.366962414
-0.0483 0.121380953
0.1855
0.48315881
0.4029 1.298019912
0.3975 1.267255206
-0.4474 1.620179844
0.1576 0.405951562
-0.3403 0.995711518
0.2453 0.659699189
-0.2298 0.612090248
0.2840
0.78571289

26.10088724

1.80

24.63585714
26.44947643
28.89405974
28.80176562

1.78
1.80
1.80
1.80

20.13946047
26.21785469

1.68
1.80

22.01286544
26.97909757

1.72
1.80

23.16372926
27.35713867

1.74
1.80