Case study – A business firm is contemplating the installation of a material handling system, and tw

Case study – 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. AGVS(in thousands) Conveyor (in thousands)Initial cost 280 360Annual operating cost 50 35The estimated salvage values areYear AGVS(in thousands) Conveyor (in thousands)1 230 3002 185 2453 145 2004 110 1605 80 125A MARR of 10% is used.1. 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)2. If the company’s planning horizon is 4 years, which system should be used?