Hand written solutions are strictly prohibited Apricot Computers is considering replacing its material handling system and either purchasing or leasing a new system. The oldsystem has an annual operating and maintenance cost of $30,000, a remaining life of 8 years, and an estimated salvage value of $4,300at that time.A new system can be purchased for $278,000; it will be worth $27,000 in 8 years; and it will have annual operating and maintenancecosts of $19,000/year. If the new system is purchased, the old system can be traded in for $21,000.Leasing a new system will cost $25,000/year, payable at the beginning of the year, plus operating costs of $8,700/year, payable at theend of the year. If the new system is leased, the old system will be sold for $10,000.MARR is 18%. Compare the annual worths of keeping the old system, buying a new system, and leasing a new system based upon aplanning horizon of 8 years.Click here to access the TVM Factor Table CalculatorFor calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 2 decimal places, e.g. 52.75. Theabsolute cell tolerance is ±1Part aWhat is the EUAC of the best option using the cash flow approach?$

1. Keeping the old system: Annual Worth (Old) = Annual operating and maintenance cost + Salvage…

Answered: Apricot Computers is considering…

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

A machine be purchased for P 2,500,000. It will incur P40,000 in maintenance expenses and can start earning revenues of P125,000 per month as soon as it is installed. It can be sold at the end of its useful life of 4 years at an estimated price of P160,000. The cost of capital is 15% per annum. The reinvestment rate is 12 %. Evaluate using Present Worth, Annual Worth and Future Worth Method to determine if it is acceptable (positive value) note: present WORTH not present value thanks
A machine be purchased for P 2,500,000. It will incur P40,000 in maintenance expenses and can start earning revenues of P125,000 per month as soon as it is installed. It can be sold at the end of its useful life of 4 years at an estimated price of P160,000. The cost of capital is 15% per annum. The reinvestment rate is 12 %. Evaluate using Present Worth, Annual Worth and Future Worth Method to determine if it is acceptable (positive value) note: present WORTH not present value
Maxx International is considering one of two forklifts trucks for its assembly plant. Truck A costs $15,000 and requires $3,000 monthly in operating expenses. It will have a salvage value of $5,000 at the end of its three-year service life. Tuck B costs $20,000 but requires only $2,000 annually in operating expenses; its service life is 4 years; at which time, its expected salvage value will be $8,000. The MARR is 10%. Assuming that the trucks are needed for 12 years and that no significant changes are expected in the future price and functional capacity each truck, select the most economical truck based on AE analysis. Fill in the blanks: a. Firm's MARR for truck A ? ......................................................... b First Cost for truck A? ......................................................... First cost for truck B? ............................................................ c Monthly opening costs for truck A ................................ Monthly…
Maxx International is considering one of two forklifts trucks for its assembly plant. Truck A costs $15,000 and requires $3,000 monthly in operating expenses. It will have a salvage value of $5,000 at the end of its three-year service life. Tuck B costs $20,000 but requires only $2,000 annually in operating expenses; its service life is 4 years; at which time, its expected salvage value will be $8,000. The MARR is 10%. Assuming that the trucks are needed for 12 years and that no significant changes are expected in the future price and functional capacity each truck, select the most economical truck based on AE analysis. Fill in the blanks: Costs of ownership for truck A Operating costs for truck A ........................................ Total annual costs for truck A ....................
A recent graduate who wants to start an excavation/ earth-moving business is trying to determine which size of used dump truck to buy. He knows that as the bed size increases, the net income increases, but he is uncertain whether the incremental expenditure required for the larger trucks is justified. The cash flows associated with each size truck are estimated below. The contractor has established a MARR of 18% per year, and all trucks are expected to have a remaining economic life of 5 years. (a) Determine which size truck he should purchase. (b) If two trucks are to be purchased, what should be the size of the second truck? (Note: Problem 8.44 requests a spreadsheet solution of these alternatives.) Truck Bed Size, m3 Initial Investment, $ M&O, $/Year Salvage Value, $ Annual Revenue, $/Year 8 −30,000 −14,000 +2,000 +26,500 10 −34,000 −15,500 +2,500 +30,000 15 −38,000 −18,000 +3,000 +33,500 20 −48,000 −21,000 +3,500 +40,500 25 −57,000 −26,000 +4,600 +49,000
A new utility service truck can be purchase for $70,043. Its expected useful life is six years, at which time its market value will the zero. Annual receipts less expenses will be approximately $28,084 per year over the six-year study period. Compute Present Worth (PW) with a MARR of 20% to determine whether this is good investment.
Question 8 Canada's Wonderland has decided to carry out an analysis to determine when one of its roller coasters should be replaced. The existing roller coaster was purchased 25 years ago for $715,000. The costs of operating and maintaining this ride for a 5-year study period are predicted to be $70,000 in year 1 and would increase by $1,300 each year thereafter (i.e. $71,300 in year 2, $72,600 in year 3, etc.) Canada's Wonderland uses a MARR of 10% for roller coaster projects. (a) If the roller coaster loses value at a rate of 7% per year, what is the salvage value at the end of the study period? (b) What is the EAC for operating & maintenance costs (O&M) after 4 years in the study period? (c) Supposing the salvage value after 2 years in the study period is $100,773, what is the EAC for capital costs after 2 years in the study period? . (d) What is the economic remaining life of the roller coaster (i.e. in the study period)?
A potential project is currently under review. An initial investment of 87000 would be necessary for equipment. The annual revenues and expenses are expected to be 40000 and 19000 each year, respectively, over the 6-year project period. The salvage value of the equipment at the end of the project period is projected to be $17000. Assume a MARR of 9%. Find the PW (to the nearest cent).
Mr. Garcia sold his machine for P20,000 after using it for 6 years. He bought a new machine worth 75,000 with an expected life of 12 years and a salvage value of 2,000. The operating cost is P5,500 per year. The old machine which he bought for P50,000 when new will be useful for 10 years and a junk value of 1,000 but because of appropriate maintenance, it will be useful for another 5 years, no salvage value, with an annual operating cost of twice the new one. If money is worth 12%, was the engineer justified in selling the old machine? Use the ROR method. Show complete solution. Thank you
A potential project is currently under review. An initial investment of $87,000 would be necessary for equipment. The annual revenues and expenses are expected to be $40,000 and $19,000 each year, respectively, over the 6-year project period. The salvage value of the equipment at the end of the project period is projected to be $17,000. Assume a MARR of 9%. Find the AW (directly - do not convert from either FW or PW - to the nearest cent).
Value Lodges owns an economy motel chain and is considering building a new 200-unit motel. The cost to build the motel is estimated at $8,000,000; Value Lodges estimates furnishings for the motel will cost an additional $700,000 and will require replacement every 5 years. Annual operating and maintenance costs for the motel are estimated to be $800,000. The average rental rate for a unit is anticipated to be $40/day. Value Lodges expects the motel to have a life of 15 years and a salvage value of $900,000 at the end of 15 years. This estimated salvage value assumes that the furnishings are not new. Furnishings have no salvage value at the end of each 5-year replacement interval. Assuming average daily occupancy percentages of 50%, 60%, 70%, and 80% for years 1 through 4, respectively, and 90% for the 5th through 15th years, a MARR of 12%/year, 365 operating days/year, and ignoring the cost of land, should the motel be built? Base your decision on an internal rate of return analysis.…
Texas Popcorn Corporation is planning to fully automate it process. The company CEO is currently looking into three options. Options A costs $450,000, AOC of $55,000, and salvage value of $85,000 after 3 years. Option B will cost $720,000 with an AOC of $68,000 and salvage of $95,000 after 4 years. Option C cost $800,000 with an AOC of $95,000 and salvage of $125,000 after 6 years. Which machine should the company select at an interest rate of 10% per year? Assume the project service life is 8 years. Please note that the salvage value of Equipment A is $230,000 after a two year of use and Equipment C, is $290,000 after two years of operation. Please provide handwritten solution.

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS