A CNC mill was purchased 4 years ago for $60,000. Even though it is still a productivemachine, a better machine is now on the market that can be bought for $80,000. The new machinewill increase the benefit by reducing the annual operating costs. Operating cost and book values areshown below for both machines. (MARR=15%)Obtain the EAC of capital cost and EAC of operating cost for both defender and challenger over theyears and draw the curves in Excel including the EAC of total costs.Obtain the economic life associated with the minimum EAC of total costs for both defender andchallengerIs it worth replacing the machine if the machine is required only for the next 4 years?DefenderChallengerYearOp. Cost ($) Book Value ($) Op. Cost ($) Book Value ($)32,00080,000420024,00070068,000450015,000110061,000349007,500150056,000452002,500190052,0005230040,0006270020,000

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Answered: A CNC mill was purchased 4 years ago…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Five machines were originally estimated to have useful life of twelve years. If sold now, each can be sold for P5,500. The annual operating costs for each are one operator at P22.00 a day, 300 days a year; a yearly energy utilization is 6,000 kw-hr at P0.50 per kw-hr; upkeep including spare parts are estimated P700 a year. Taxes and insurance are 7% of first cost. The machine has the same capacity as the fivbe machines and is now available at an estimated first cost including installation of P80, 000. Sinking fund method is used at 15% in computation od depreciation. Will you recommend replacementif money is worth 20% to a company?
Two lathes are being considered in the manufacture of certain machine parts. Data is given below, all cost in peso: REQUIRED:a. Determine the number of machine parts/year that could be produced so that 2 lathes will be equally economical ifthe MARR is 18%. Use AWMb. If the number of parts is 10,000 units, which lathe will you recommend? Use RORc. If the number of parts is 10,000 units, which lathe will you recommend? Use PWM
An investment of P 250,000 can be made in a project that will produce a uniform annual revenue of P 192,800 for 5 years and then have a salvage value of 10% of the first cost. Operation and maintenance will be P 72,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn 20% before income taxes. Show whether or not the investment is justified economically using1. ROR method2. payout method
Corrosive liquids are transported through pipes in a factory . Ordinary pipes will have an installedcost of P30,000 and their useful life is 3 years . Stainless steel pipes are higly resistant to the corrosive effectof the liquids and are being considered as an alternative . These pipes are estimated to have an installed costof P55,000 . Salvage value is zero in each case . If money is worth 8% and assuming replacement costs to be thesame as the original prices , what should be the useful life of the stainless steel pipes to have equal capitalizedcost as the ordinary pipes? A) 5.3 years C) 5.9 yearsB) 5.6 years D) 6.2 years
A remotely situated fuel cell has an installed cost of $2,000 and will reduceexisting surveillance expenses by $350 per year for eight years. The border security agency’s MARR is 10% per year. Solve, a. What is the minimum salvage (market) value after eight years that makes the fuel cell worth purchasing? b. What is the fuel cell’s IRR if the salvage value is negligible?
Economics A commercial 3D printer is purchased for $310,000. The salvage value of the printer decreases by 45% each year that it is held. The cost to operate and maintain the machine the first year it is used is $12,000; these costs increase by $5,500 each year. What is the optimal replacement interval and minimum EUAC for the printer, assuming a MARR of 11% is used? ORI: years EUAC*: $
An expansion of the current BIM (Building Information Model) software has been proposed to First Financial, the building’s owner. A total installed cost of $120,000 is expected to generate additional savings of $40,000 per year for 10 years, after which time the software will be replaced with no salvage value. The annual M&O cost is expected to be $10,000 the first year and increase by an arithmetic gradient G between $1000 and $5000 per year thereafter. Determine if the expanded BIM is sensitive to gradient increases of $1000 (optimistic), $3000 (most likely), and $5000 (pessimistic) per year. Use AW analysis and a MARR of 10% per year.
A building supplies distributor purchased a gasoline-powered forklift truck 4 years ago for $8,000. At that time, the estimated useful life was 8 years with a salvage value of $800 at the end of this time. The truck can now be sold for $2,500. For this truck, average annual O&M expenses for year j have been Cj = $2, 000 + $400(j − 1) Now the distributor is considering the purchase of a smaller battery-powered truck for $6,500. The estimated life is 10 years, with the salvage value decreasing by $600 each year. Average annual O&M expenses are expected to be $1,200. If a MARR of 10% is assumed and a 4-year planning horizon is adopted, based on an annual worth cash flow approach should the replacement be made now?
A piece of equipment has a first cost of $190,000, a maximum useful life of 7 years, and a market (salvage) value described by the relation S = 120,000 – 13,000k, where k is the number of years since it was purchased. The salvage value cannot go below zero. The AOC series is estimated using AOC = 60,000 + 5,000k. The interest rate is 8% per year. Determine the economic service life and the respective AW. The economic service life is year(s) and the AW value is $_______
$250,000 is invested in equipment having a salvage value equal to $250,000(0.80n) after n years of use. O&M costs equal $60,000 the first year and increase $8,000 per year. Based on a MARR of 10%, what are the optimum replacement interval and minimum EUAC?
A factory manager bought a rare machine for $10 million. of the machine The sales value at the end of the first year will be $3 million and the machine will be sold by antique dealers. It is estimated to be valued at $500,000 due to the Initial cost of maintenance Expected to be $300,000 in 3 years and double each year thereafter. In this way, the maintenance cost of the 4th year is $600,000, the maintenance cost of the 5th year is $1,200,000, etc. will be. Calculate the economic life of this machine based on the Minimum Attractive Efficiency Ratio of 15%.
Jane Livingston, an industrial engineer at Energy Conservation Service, hasfound that the anticipated profitability of a newly developed water-heaterthe temperature-control device can be measured by net present worth as PW = 5.63V(4.3X - $15) - 33,580 where Vis the number of units produced and sold and X is the sales price per unit. She also found that the V parameter value could occur anywhere in the range of 1,500 to 5,000 units and the X parameter value anywhere between $10 and $35 per unit. Develop a sensitivity graph as a function of the number of units produced and sales price per unit.

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