Question: The Briggs and Stratton Commercial Division designs and manufacturers small engines for golf turf maintenance equipment. A robotics-based testing system with support equipment will ensure that their new signature guarantee program entitled "Always Insta-Start" does indeed work for every engine produced. Pull System Push System First cost of equipment $-1,700,000 $-2,400,000 AOC per Year $-740,000 $-660,000 Salvage Value $125,000 $110,000 Estimated Life 8 years 8 years Determine the salvage value for the push system that will make the company indifferent to the two systems. Also, MARR = 11% per year. The salvage value for the push system is determined to be $ [blank] in $1000 units.

1. **State the problem:** We need to find the salvage value for the push system that makes the company indifferent between the pull and push systems given the costs, annual operating costs (AOC), salvage values, estimated life, and MARR (minimum attractive rate of return). 2. **Given data:** - Pull system: First cost = $-1,700,000$, AOC = $-740,000$ per year, Salvage value = $125,000$, Life = 8 years - Push system: First cost = $-2,400,000$, AOC = $-660,000$ per year, Salvage value = unknown $S$, Life = 8 years - MARR = 11% per year 3. **Formula used:** We use the Present Worth (PW) method to compare the two systems. The company is indifferent when the present worth of costs for both systems are equal. The present worth of each system is: $$PW = \text{First Cost} + AOC \times P/A(i,n) + \frac{\text{Salvage Value}}{(1+i)^n}$$ where $P/A(i,n)$ is the present worth factor for an annuity: $$P/A(i,n) = \frac{1-(1+i)^{-n}}{i}$$ 4. **Calculate $P/A(0.11,8)$:** $$P/A = \frac{1-(1+0.11)^{-8}}{0.11} = \frac{1-\frac{1}{(1.11)^8}}{0.11}$$ Calculate $(1.11)^8$: $$1.11^8 \approx 2.3138$$ So: $$P/A = \frac{1 - \frac{1}{2.3138}}{0.11} = \frac{1 - 0.432}{0.11} = \frac{0.568}{0.11} \approx 5.164$$ 5. **Calculate present worth for pull system:** $$PW_{pull} = -1,700,000 + (-740,000) \times 5.164 + \frac{125,000}{(1.11)^8}$$ Calculate the salvage present worth: $$\frac{125,000}{2.3138} \approx 54,031$$ Calculate the AOC term: $$-740,000 \times 5.164 = -3,821,360$$ Sum all: $$PW_{pull} = -1,700,000 - 3,821,360 + 54,031 = -5,467,329$$ 6. **Set present worth of push system equal to pull system to find $S$:** $$PW_{push} = -2,400,000 + (-660,000) \times 5.164 + \frac{S}{2.3138} = PW_{pull}$$ Calculate the AOC term for push system: $$-660,000 \times 5.164 = -3,408,240$$ So: $$-2,400,000 - 3,408,240 + \frac{S}{2.3138} = -5,467,329$$ Simplify: $$-5,808,240 + \frac{S}{2.3138} = -5,467,329$$ Add $5,808,240$ to both sides: $$\frac{S}{2.3138} = 340,911$$ Multiply both sides by $2.3138$: $$S = 340,911 \times 2.3138 = 788,500$$ 7. **Final answer:** The salvage value for the push system that makes the company indifferent is approximately $788,500$. 8. **Expressed in $1000 units:** $$\frac{788,500}{1000} = 788.5$$ **Answer:** The salvage value for the push system is $788.5$ in $1000 units.