In Response to the New Federal Regulation to Provide the Public

question 19

Essay

In response to the new federal regulation to provide the public with safe and wholesome seafood, an Alaska seafood processor is considering two new sanitation control systems to help monitor its seafood processing operations. System X has a useful life of 20 years and requires an installed cost of $33,000 and annual maintenance cost of $7000. Some of the equipment can be sold at $2200 at the end its useful life. System Y has a useful life of 10 years. The system will cost $16,500 to install and will involve an annual maintenance fee of $8500. At the end of year 10, system Y can be upgraded for $23,100 to have the same capability and will last another 10 years. However, the upgraded system will require an annual maintenance fee of $8700. The salvage value for the system Y is negligible. Which system should be selected based on the present worth method? Assume the company uses a MARR of 5% per year.

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Definitions:

Correlation Coefficient

A statistical measure that calculates the strength and direction of a linear relationship between two quantitative variables.

Trend Projection

A forecasting technique that involves analyzing historical data to identify consistent results or directions over time.

Linear Regression

A statistical method used to model the relationship between a dependent variable and one or more independent variables.

Independent Variable

A variable in an experiment or model that is manipulated or changed to observe its effects on a dependent variable.