A machine that cost $120,000 3 years ago can be sold now for $47,250. Its market value is expected to be $40,000 and $20,000 1 year and 2 years from now, respectively. Its operating cost was $18,000 for the first 3 years of its life, but the M&O cost is expected to be $23,000 for the next 2 years. A new improved machine that can be purchased for $149,250 will have an economic life of 5 years, and an operating cost of $9,000 per year, and a salvage value of $32,000 whenever it is replaced. At an interest rate of 10% per year, determine if the presently owned machine should be replaced now, 1 year from now, or 2 years from now. The annual worth of the existing machine one year from now is $- now is $- and the annual worth of the new machine is $- The presently owned machine should be replaced (Click to select) the annual worth of the existing machine two years from

A machine that cost $120,000 3 years ago can be sold now for $47,250. Its market value is expected to be $40,000 and $20,000 1 year and 2 years from now, respectively. Its operating cost was $18,000 for the first 3 years of its life, but the M&O cost is expected to be $23,000 for the next 2 years. A new improved machine that can be purchased for $149,250 will have an economic life of 5 years, and an operating cost of $9,000 per year, and a salvage value of $32,000 whenever it is replaced. At an interest rate of 10% per year, determine if the presently owned machine should be replaced now, 1 year from now, or 2 years from now. The annual worth of the existing machine one year from now is $- now is $- and the annual worth of the new machine is $- The presently owned machine should be replaced (Click to select) the annual worth of the existing machine two years from

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

An item's initial cost is P 800,000, and its market worth after 5 years is P 507,630. Determine the equipment's estimated salvage value.
A recapping plant is planning to acquire a new Diesel generating set to replace its resent unitwhich they run during brownouts. The new set would cost ₱ 135,000 with a five (5) year-life,and no estimated salvage value. Variable cost would be ₱ 150,000 a year.The old generating set has a book value of ₱ 75,000 and a remaining life of 5 years. Itsdisposal value now is ₱ 7,500 but it would be zero after 5 years. Variable operating cost wouldbe ₱187,500 a year. Money is worth 10%.Which is profitable, to buy new generator or retain the old set? Support answer using:a) Equivalent Uniform Annual Cost (EUAC) Method
A recapping plant is planning to acquire a new Diesel generating set to replace its resent unitwhich they run during brownouts. The new set would cost ₱ 135,000 with a five (5) year-life,and no estimated salvage value. Variable cost would be ₱ 150,000 a year.The old generating set has a book value of ₱ 75,000 and a remaining life of 5 years. Itsdisposal value now is ₱ 7,500 but it would be zero after 5 years. Variable operating cost wouldbe ₱187,500 a year. Money is worth 10%.Which is profitable, to buy new generator or retain the old set? Support answer using:a) Annual Cost Methodb) Equivalent Uniform Annual Cost Method
A packaging company is planning to replace its existing material handling system (MHS). The MHS that it now owns cost $135000 when purchased 7 years ago and was estimated to have 12 year useful life with a $3000 salvage value at the end of that time. Currently, the MHS has a net market value of $40000 and if it is not sold, it is expected to have operating costs of $24000 per year. A new MHS can be purchase for $85000. This new system is expected to have operating costs of $17000, an economic life of 7 years, and a salvage value of $10000 at the end of that time. For depreciation purposes, assume that the straight line method has been used, and the current MHS and new MHS are 10 year and 5 year recovery property, respectively. If the effective tax rate is 50%, which alternative should be selected in the case of a before tax MARR of 20% and an after tax MARR of 10%
PLEASE WRITE YOUR SOLUTION ON A PAPER, THANK YOU A Contractor imported a bulldozer for his job, paying P 350,000 to the Manufacturer. Freight andInsurance charges amounted to P 18,000; customs’ broker’s fees and arrastre services, P 8,500;taxes, permits and other expenses, P 35,000. If the contractor estimates the life of the bulldozer tobe 10 years with a salvage value of P 20,000, determine the book value at the end of 8 years, a. using the Double Declining Balance Method. b. using the Declining Balance Method. c. using the Sinking Fund Method, i = 10% d. using the Sum of the Years Method
1 a delivery vehicle, Defender, D for your grocery delivery company cost $50,000, 10 years ago. it can be used for 4 more years with annual operating costs of $40,000 and an estimated salvage value of $10,000. A new better van can be purchased for 60,000. it has an economic life of 8 years. annual operating costs of $15,000, and an estimated salvage value of $20,000. if purchased the new better van will result in additional revenue of $15,000 per year. what market value now for the currently owned van will make the new van equally attractive. The MARR is 15% compounded annually. (the Pd is negative)
In a replacement study, the correct value for the first cost of the challenger is:a. the cost when it is purchased.b. the first cost minus the trade-in value of the defender.c. its first cost plus the trade-in value of the defender.d. the book value of the defender.
A car costs ₱800,000, 4 years ago, and the salvage value is ₱50,000, 6 years from now. If it is to be replaced by a new one and the trade-in value is ₱450,000, find the sunk cost if money is worth 12%
Machine A was purchased 5 years ago for $90,000. Its operating cost is higher than expected, so it will be used for only 4 more years. Its operating cost this year will be $40,000, increasing by $2000 per year through the end of its useful life. The challenger, machine B, will cost $150,000 with a $50,000 salvage value after its 10-year ESL. Its operating cost is expected to be$10,000 for year 1, increasing by $500 per year thereafter. What is the market value for machine A that would make the two machines equally attractiveat an interest rate of 12% per year?
Sacramento Cab Company owns several taxis that were purchased for $25,000 each 4 years ago. The cabs’ 42 current market value is $12,000 each, and if they are kept for another 6 years they can be sold for $2000 per A cab. The annual maintenance cost per cab is $1000 per year. Sacramento Cab has been approached about a leasing plan that would replace the cabs. The leasing plan calls for payments of $6000 per year. The annual maintenance cost for each leased cab is $750 per year. Should the cabs be replaced if the interest rate is 10%?
Allen Construction purchased a crane 6 years ago for $130,000. They need a crane of this capacity for the next 5 years. Normal operation costs $35,000 per year. The current crane will have no salvage value at the end of 5 more years. Allen can trade in the current crane for its market value of $40,000 toward the purchase of a new one, which costs $150,000. The new crane will cost only $8,000 per year under normal operating conditions and will have a salvage value of $55,000 after 5 years. If MARR is 20%, determine which option is preferred. a) Use cash flow approach (insider's viewpoint approach) b) Use the opportunity cost approach (outsider's viewpoint approach)
The mining company is considering purchasing a machine which costs $30000 and is expected to last 12 years with a $3000 Salvage value. The annual operating expenses are expected to be $9000 for the first 4 years, but owing to decreased use, the operating costs will decrease by $400 per year for the next 8 years. Alternatively, the company can prirchase a highly automated machine at a cost of $58000. This machine will last only 6 years because of its high technology. and delicate design, and its salvage value will be $15000. Because it it is so automated, its operating cost will be only $4.000 per year. If the company's minimum attractive fate of return is 20% per year, which Machine should be selected on the basis of present worth analysis?