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Two production methods are to be compared, one a robot cell and
the other a manual operation. The robot cell has a first cost of
$120,000, annual operating and maintenance costs of $25,000, and
revenues of $75,000. The manual method has a first cost of $30,000,
annual operating and maintenance costs of $60,000, and the same
revenues of $75,000. In both cases the anticipated service life for
the project is 3 years.

(a) Determine which alternative should be selected using the
payback method.

(b) Determine which alternative should be selected using the
return on investment method.

(c) Explain why each method selects opposite alternatives. Which
method would you place more reliance on and why?