IE2308-006 Chapter 9 problem

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asset lives, and (c) limited wherein the period is a multiple of asset lives? Explain your answers. 9.4 An entrepreneurial civil engineer who owns his oWn design/build company purchased a small Crane 2 years ago at a cost of $71,000. At that time, it was expected to be used for 10 years and then traded in for its salvage value of $10,000. Due to increased construction activities, the company would prefer to trade for a new, larger Crane now which will cost $93.000. The com pany estimates that the old crane can be used, if necessary, for another 4 years, at which time it will have a $25,000 estimated market value. Its current market value is estimated to be $39,000, and if it is used for another 4 years, it will have M&O costs of $17,000 per year. Determine the values of P, n, S, and AOC that should be used for the existing crane in a replacement analysis performed today. 9.5 A mechanical engineer who designs and sells equipment that automates manual labor processes is offering a machine/robot combination that will significantly reduce labor costs associated with manufacturing garage-door opener transmitters. The equipment has a first cost of $170,000, an es timated annual operating cost of $54,000, a maxi mum useful life of 5 years, and a $20,000 salvage value anytime it is replaced. The existing equip one more year, which will be the third year of ownership. Economic Service Life 9.7 The AW values for retaining a presently owned Imachine for additional years are shown in the table. (Note that the values are the AW amount per each of the n years that the asset is kept.) A chal lenger has an economic service life of 7 years with an AWc=$-86,000 per year. Assuming future costs remain as estimated for the replacement study, what is the economic service life of the de fender, if the company's MARR is 12% per year? Assume used machines like the one presently Öwned will always be available. Retention Period, Years facili 1 2 3 4 AW Value, $ per Year -92,000 -86,000 -85,000 -89,000 -95,000 9.8 To improve package tracking at a UPS transfer

260 Chapter 9 Replacement and Retention Decisions 9.16 A presently owned machine can last for three more years, if properly maintained at a cost of $15,000 per year. Its operating cost will be $31,000 per year. After three years, it can be sold for an esti mated $9000. A replacenent costs $80,000 with a $10,000 salvage value afier three years and an op erating cost of $19,000 per year. Different vendors have offered $10,000 and $20,000, respectivcly, for the current system in trade for the replacement. A 12% per year interest, perform a replacement study for the two trade-in offerS. 9.17 A piece of imaging equipment was purchased two years ago for $50,000 with an expected useful life of 5 years and a $S000 salvage value. Since its in stallation pertormance was poor, it was upgraded for $20,000 one year ago, Increased denmand now requires another upgrade for an additional $22,000 so that it can be used for 3 more years. Its new an nual operating cost will be $27,000 with a $12,000 salvage after the 3 years. Alternatively, it can be replaced with new equipment costing $65,000, op erating costs of $14,000 per year and an expected salvage of $23,000 after 3 years. If replaced now, the existing equipment will be sold for $7000. De termine whether the company should keep or re place the defender at a MARR of 10% per year. 9.18 The plant manager asked you to do a cost analysis to determine when currently owned equipment should be replaced. The manager stated that under no circumstances will the existing equipment be retained longer than two more years It can be re placed any year with an outside contractor at a cost of $97,000 per year. The market value of the cur rently owned equipment is estimated to be $37,000 now, $30,000 in one year, and $19,000 tWo years from now. The operating cost is $85,000 per year. Using an interest rate of 10% per year, determine when the defending equipment should be retired. 9.19 A small company that manufactures vibration is0 lation platforms is trying to decide whether it should immediately upgrade the current assembly system D, which is rather labor-intensive, with the more highly automated system C one year from now. Some components of the current system can be sold now for $9000, but they will be worthless hereafter. The operating cost of the existing sys tem is $192,000 per year. System C will cost $320,000 with a $50,000 salvage value after four years. Its operating cost will be $68,000 per year. If you are told to do a replacement analysis using an interest rate of 10% per year, which system do you recommend? 9.20 A critical machine in the Freeport copper refining operation was purchased 7 years ago for $160,000 Last year a replacement study was performed with the decision to retain for 3 more years. The situa tion has changed. The equipment is estimated to have a value of $8000 if "scavenged" for parts now or anytime in the future. If kept in service, it can be minimally upgraded at a cost of $43,000 to make it Usable for up to 2 more years. lts operating cost is estimated at $22,000 the first year and $25,000 the second year. Alternatively, the company can pur chase a new system that will have an equivalent annual worth of $54,063 per year Over its ESL. The company uses a MARR of 10% per year. Use annual worth analysis to determine when the com pany should replace the machine. 9.21 A biotech company planning a plant expansion is trying to determine whether it should upgrade the existing controlled-environment rooms or pur chase new ones. The presently owned rooms were purchased 4 years ago for $250,00. They have a current "quick sale" value of $30,000. However. for an investment of $100,000 now, they can be adequate for another 4 years, after which they could be sold for an estimated $40,000. Alterna tively, new controlled-environment rooms cost $300,000, have an expected 10-year economic life, and a $50,000 salvage value after that time. Determine whether the company should upgrade the existing controlled-environment rooms or pur chase new ones. Use a MARR of 12% per year and assume that used controlled-environment rooms will always be available. Defender Replacement Value 9.22 From the data shown below, determine the trade-in value of machine X that will render its AW the same as that of machine Y, Use an interest rate o 8% per year. Market value, $ Annual cost, $ per year Salvage value, $ Life, years Machine X -60,000 15,000 3 Machine Y -80,000 -40,000 year 1, increasing by 2000 per year thereafter 20,000

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