Posted: May 29th, 2015
Multi-attribute Decision Analysis
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Case study 1
A business firm is contemplating the installation of a material handling system, and two designs are being considered. The first design is an automated guided vehicle system (AGVS). The second design is a pallet conveyor system.
The estimated costing data for the two systems are shown below
AGVS(in thousands) Conveyor (in thousands)
Initial cost 280 360
Annual operating cost 50 35
The estimated salvage values are
Year AGVS(in thousands) Conveyor (in thousands)
1 230 300
2 185 245
3 145 200
4 110 160
5 80 125
A MARR of 10% is used.
- Using PV technique, determine the break-even value for the planning horizon, i.e the number of years where the costs of both systems are equal)
- If the company’s planning horizon is 4 years, which system should be used?
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