Document Type

Closed Project

Publication Date

Spring 1998

Course Number

ETM 535


JM Corporation is a growing manufacturer of plastic injection molded products. One of its manufacturing lines for consumer packaging is comprised of ten-year old machines which appear to have exceeded their economic life. Reject rates are high and maintenance costs have risen dramatically. Using the financial constraints of the company and economic analysis, Rejects Limited, and Engineering consulting firm, has considered several options for bringing the production line back up to economic efficiency. The options include using the 'do nothing' as a base and comparing different scenarios of new and/or rebuild replacement of machines. The options were considered on a Present Worth and Annual Equivalent basis. The scenario consisting of replacing all old machines with all new, was chosen as the best option and a sensitivity analysis revealed that Capital investment has the greatest impact when deviated significantly from the expected values used in the cash flow analysis.


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