A pallette conveyor system used to transport pallettes of product at the Browning Harvey plant in St. John's costs $160,000 plus $50,000 to install. It is estimated to depreciate at a declining balance rate of 25% per year over its 15-year useful life. Annual maintenance costs are estimated to be $9,500 for the first year, increasing by 20% every year thereafter. In addition, every third year, the rollers must be replaced at a cost of $9,000. Interest is at 11%. Construct a spreadsheet that has the following headings: Year, Salvage Value, Maintenance Costs, and the EAC of each of Capital Costs, Maintenance Costs and a Total Equivalent Annual Costs (as used in the lectures and is shown below). The economic life of the conveyor system is determined by the year that has the lowest Total Equivalent Annual Cost. Complete the row of the table below, inputting data for the row that has the lowest Total Equivalent Annual Cost from your spreadsheet for this project:

A pallette conveyor system used to transport pallettes of product at the Browning Harvey plant in St. John's costs $160,000 plus $50,000 to install. It is estimated to depreciate at a declining balance rate of 25% per year over its 15-year useful life. Annual maintenance costs are estimated to be $9,500 for the first year, increasing by 20% every year thereafter. In addition, every third year, the rollers must be replaced at a cost of $9,000. Interest is at 11%. Construct a spreadsheet that has the following headings: Year, Salvage Value, Maintenance Costs, and the EAC of each of Capital Costs, Maintenance Costs and a Total Equivalent Annual Costs (as used in the lectures and is shown below). The economic life of the conveyor system is determined by the year that has the lowest Total Equivalent Annual Cost. Complete the row of the table below, inputting data for the row that has the lowest Total Equivalent Annual Cost from your spreadsheet for this project:

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 2E

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