Two new automated material handling devices (MHDs) are being considered by Andes Industries for reducing its warehousing costs. It must decide if it should invest in one of these two MHDs or continue with the current manual operation. Relevant data is given below. MARR is 15% per vear compounded annually. MHD 1 MHD 2
Initial cost $450,000 $375,000
Estimated life 3 years 3 years
Salvage value $90,000 $75,000
Annual O&M cost $60,000 $90,000
Annual savings in labor cost $240,000 $225,000
Should Andes Industries buy one of these MHDs or continue with its current manual operation? Solve using the present worth method.