Problem_Set_2_Group_O

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Required information Problem 14.056 The two machines shown are being considered for a chip manufacturing operation. Assume the MARR is a real return of 14% per year and that the inflation rate is 6.7% per year. A B Machine First Cost, $ -146,000 -820,000 -5,000 -70,000 M&O, $ per year Salvage Value, $ 40,000 200,000 Life, years 5 00 Problem 14.056.a: Compare two alternatives based on their AW values without inflation consideration Which machine should be selected on the basis of an annual worth analysis if the estimates are in constant-value dollars? What is the annual worth of the selected alternative? Select machine (Click to select]: wwwwwwwwwwww wwwwww... The annual worth of the alternative is $

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Reference: Case Study S Dunn Manufacturing is considering the following two alternatives. The cost information for the two proposals for replacing an equipment are provided are in table below. Initial cost Benefits/year Machine X $120,000 $20,000 for the first 10 years and $9,000 for the next 10 years Life Salvage value $40,000 MARR 5.2. The NPW of machine X is A) $35,158 B) $48,192 C) $50,752 Machine Y $96,000 $12,000 per year for 20 years. 20 years 8% $20,000

D Question 16 A $60,000 outlay for a new machine with a usable life of 15 years is called O replacement expenditure operating expenditure O capital expenditure 4 pts O financing expenditure

a- At 10%, find PW for the following Table Warehouse cost equipment cost Installation cost Annual maintenance costs Annual Revenues Salvage Machine life 0 1 2 3 -90,000 b- A project with an IRR = 20%, it has the following NCF (S) X X 4000 (SUS) 50,000 46.000 Find X? 6,500 8,000 45,000 15,000 15 years

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Problem 5: Platypus Corporation's managers have presented the company's management with two proposals for expanding its production capacity. Based on the following two different alternatives, which proposal should they adopt? Cost of the Equipment Required Project 1 $250,000 Working Capital Investment Required 0 Annual Cash Inflows $65,000 Maintenance cost in year 4 $15,000 Maintenance cost in year 6 0 Salvage Value of Equipment in 8 Years $12,000 Project 2 $100,000 $150,000 $50,000 0 $15,000 0 Both projects have a life of 8 years. In 8 years Project 2's working capital will be released and be available to invest in other projects. The company has a discount rate of 16% Required: 1) Calculate the net present value for each project. 2) Based solely on the net present value of the project, which alternative would you recommend the company invest in? Why?

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Cost $150,000 Training $17,000 Installation $15,000 Cisco Systems is purchasing a new bar code - scanning device for its service center in San Francisco. The table on the right lists the relevant initial costs for this purchase. The service life of the system is 4 years and its salvage value for depreciation purposes is expected to be about 28% of the hardware cost. Cost Item Hardware a. What is the cost basis of the device? b. What are the annual depreciations of the device if (i) the SL method is used? (ii) the 150% DB method is used? (iii) the 200% DB method is used? c. Calculate the book values of the device at the end of 4 years using all the methods above. Answers: (a) The cost basis of the device is $☐ (Round to the nearest dollar) (b) Annual depreciaitions and book values: (Round to the nearest dollar) SL Year 1 2 $ 3 4 Book values at $ end of year 4 150% DB ☐ 200% DB $ $

Exercise 1 The Sunshine company is considering two projects, project A and project B. Project A requires the purchase of an equipment but no working capital investment whereas project B requires a working | capital investment but no equipment. The relevant information for net present value analysis is given below: Cost of equipment Working capital needed Annual cash inflows Salvage value of equipment Project life Project A Project B $600,000 $160,000 $ 40,000 $600,000 $120,000 8 years 8 years The working capital required for project B will be released at the end of project life. Sunshine company uses an 18% discount rate. Select the best investment using net present value (NPV) method. (Ignore income tax).

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2 Costs and expenses Project 5 7 initial investment cost 528.000 years additional major maintenance in year 3 additional major annual operation and maintenance expense annual labor costs 21.000 maintenance in year Salvage value Annual income ($) A Economic life Cost of capital 75.000 130.000 $20.000 250.000 375.000 235.000 of D 9.500 11.000 27.000 B 85.000 90.000 180.000 320.000 380.000 270.000 125.000 160.000 6 15%. Project B 785.000 7.850 18.000 8.000 40.000 8 15. TOMOS Annual Equivalent Net Income which on using method implementation determine the need.

Q3 A reactor of special design un the major item of equipment in a small chemical plant. The initial cost of a Completely installed reactor is $ 60000 to the salvage value of the end of the useful life is estimated to be $ 10000. The total annual expenses for the plant are $100000. Excluding depreciation costs for the reactor. How many years of useful life should de estimated for the reactor if 12% of the total annual expenses for the Plant are due to the cost for reactor depreciation? 1 Add File Page 2 of 2 Back Submit ever submit passwords through Google Forms.