A diesel engine uses Type A filter and high-grade lubricating oil costing $5.50 per liter. With this filter, the oil and filter have to be changed every 500 hours of operation, and 5 liters of oil have to be added every 100 hours. This filter cost $148 a piece. Eighty liter of oil fill the engine. Another type, filter B, costing $120 may be used with a lower grade oil costing $4.80 per liter. However, if this filter is used, the oil and filter have to be changed every 300 hours, and 10 liters are added after each 150 hours the engine is used. Which type of filter and oil would you recommend?

A diesel engine uses Type A filter and high-grade lubricating oil costing $5.50 per liter. With this filter, the oil and filter have to be changed every 500 hours of operation, and 5 liters of oil have to be added every 100 hours. This filter cost $148 a piece. Eighty liter of oil fill the engine. Another type, filter B, costing $120 may be used with a lower grade oil costing $4.80 per liter. However, if this filter is used, the oil and filter have to be changed every 300 hours, and 10 liters are added after each 150 hours the engine is used. Which type of filter and oil would you recommend?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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Similar questions

A corporation uses a type of motor truck which costs P 250,000, with life of 2 years and final salvage value P 40,000. If money is worth 4% and using the annual cost method, what should be the life, in years, of another type of truck for the same purpose whose that cost P 312,614 with final salvage value P 50,000? Select one: a. 2.5 b. 4 c. 3.5 d. 3
Chambers Company has just gathered estimates forconducting a break-even analysis for a new product.Variable costs are $7 a unit. The additional plant willcost $48,000. The new product will be charged $18,000a year for its share of general overhead. Advertisingexpenditures will be $80,000, and $55,000 will be spenton distribution. If the product sells for $12, what is thebreak even point in units? What is the break even pointin dollar sales volume?
A firm is considering which of twodevices to install to reduce costs. Both devices have useful lives of 5 years and no salvage value. Device A costs $10,000 and can be expected to result in $3000 savings annually. Device B costs $13,500 and will provide cost savings of $3000 the first year but will increase $500 annually, making the second-year savings $3500, the third-year savings $4000, and so forth. For a 7% MARR, which device should the firm purchase?
Two lathes are being considered in the manufacture of certain machine parts. Data is given below, all cost in peso: LATHE A LATHE B First Cost 40,000 56,000 Salvage Value 5,000 7,000 Annual Maintenance 2,000 2,800 Operation, Cost/hour 4 3.5 Life, in years 10 12 Time per part (hours) 0.40 0.25 REQUIRED: Determine the number of machine parts/year that could be produced so that 2 lathes will be equally economical if the MARR is 18%. Use AWM If the number of parts is 10,000 units, which lathe will you recommend? Use ROR If the number of parts is 10,000 units, which lathe will you recommend? Use PWM If the number of parts is 10,000 units, which lathe will you recommend? Use EUAC
1. The Present Worth Method A project your firm is considering for implementation has these estimated costs and revenues: an investment cost of $50,000; maintenance costs that start at $5,000 at the end of year (EOY) 1 and increase by $1,000 for each of the next 4 years, and then remain constant for the following 5 years; savings of $20,000 per year (EOY 1–10); and finally a resale value of $35,000 at the EOY 10. If the project has a 10-year life and the firm’s MARR is 10% per year, what is the present worth of the project? Is it a sound investment opportunity?
Ronald McDonald decides to install a fuel storage system for his farm that will save him anestimated 6.5 cents/gallon on his fuel cost. He uses an estimated 20,000 gallons/year on his farm.Initial cost of the system is $10,000 and the annual maintenance the first year is $25 and increasesby $25 each year thereafter. After a period of 10 years the estimated salvage is $3,000. If moneyis worth 12%, is it a wise investment?
A fabrication company engaged in production with a capacity of 150, 000 pieces per year. But, it is just operating at 70% of its full capacity. The company has an annual income of P 250, 000.00, annual fixed cost are P 50, 000.00 and variable costs are P 1.00 per unit. How many productions of parts must be produced for break-even point? Given: Required: Solution: refer to this textbook: https://drive.google.com/file/d/1h4ra80IE8IRtYyja16iK6TtjCrTDi73j/view?usp=sharing
4) Which of the following power plants is better investment, assuming 8% interest on the sinking fund and no salvage value in either case, taxes/insurance at 10% and interest on capital at 12%. Use ROR and Present Worth Method. - Coal plant which costs P1M, last 10 years and cost annually P100k to operate. - Fuel-oil plant which costs P800k will last 7 years and cost annually P70k to operate.
A specialty concrete mixer used in construction was purchased for $300,000 7 years ago. Its annual O&M costs are $105,000. At the end of the 8-year planning horizon, the mixer will have a salvage value of $5,000. If the mixer is replaced, a new mixer will require an initial investment of $375,000. At the end of the 8-year planning horizon, it will have a salvage value of $45,000. Its annual O&M cost will be only $40,000 due to newer technology. Analyze this using an EUAC measure and a MARR of 15 percent to see if the concrete mixer should be replaced if the old mixer is sold for its market value of $65,000. a. Use the cash ﬂow approach (insider’s viewpoint approach) b. use the opportunity cost approach (outsiders viewpoint approach) Include formulas in excel screen shots.
A project is being considered that has a first cost of $12,500, creates $5000 in annual cost savings, requires $3000 in annual operating costs, and has a salvage value of $2000 after a project life of 3 years. If interest is 10% per year, which formula calculates the project’s present worth? (a) PW = 12,500(P/F, 10%, 1) + (− 5000 + 3000) (P/A, 10%, 3) − 2000(F/P, 10%, 3) (b) PW = − 12,500 + (5000 − 3000) (P/A, 10%, 3 ) − 2000(P/F, 10%, 3) (c) PW = 12,500(F/P, 10%, 3) + (5000 − 3000) (F/A, 10%, 3) + 2000 (d) PW = − 12, 500 + 5000(P/A, 10%, 3) − 3000 (P/A, 10%, 3) + 2000(P/F, 10%, 3)
A trust fund is to be established for providing the costs associated with a small engineering laboratory for the Engineering College. The following costs are required for the engineering laboratory: (1) The construction cost is$1,500,000and the initial equipment cost is$900,000; (2) The annual laboratory operating cost is$250,000for the first 3 years and$200,000thereafter; (3) The cost of equipment replacement is$350,000every 6 years, beginning 6 years from now. How much money is required in the trust fund now to build the engineering laboratory and maintain its perpetual operation and equipment replacement? The interest rate is 8%per year.
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