Initial Investment Estimated Life Salvage Value Annual Income Annual Expense $50,000 15 $15,000 $20,000 $10,000 $80,000 30 $18,500 $30,000 $ 5,000
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MARR is 8%
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- New microelectronics testing equipment was purchased 2years ago by Mytesmall Industries at a cost of $600,000. Atthat time, it was expected to be used for 5 years and thentraded or sold for its salvage value of $75,000. Expandedbusiness in newly developed international markets is forcingthe decision to trade now for a new unit at a cost of$800,000. The current equipment could be retained, ifnecessary, for another 2 years, at which time it would have a$5000 estimated market value. The current unit is appraisedat $350,000 on the international market, and if it is used foranother 2 years, it will have M&O costs (exclusive ofoperator costs) of $125,000 per year. Determine the valuesof P, n, S, and AOC for this defender if a replacementanalysis were performed today. P = market value =$350,000AOC = $125,000 per yearn = 2 yearsS = $5,000Show complete solutiion. Do not use excel. Manual Method. Steel drums manufacturer incurs a yearly operating cost of P 200,000. Each drum manufactured cost P 160 and sells for P 300. A machine use for the production has a first cost of P 20,000 and a salvage value of P 2,000 after producing 1,000 units. What is the break even number of units per year?For these two AW relations, the breakeven point QBE in miles per year is closest to:AW1=-23,000(A/P,10%,10) + 4000(A/F,10%, 10) - 5000 - 4QBEAW2 =-8000(A/P,10%,4) - 2000 - 6QBEa. 1984b. 1224c. 1090d. 655
- Robert bought a bike for PLN 1000, which he does not use. A similar new bike currently costs PLN 1700, but when selling the old one, you can only get it for PLN 800. What is the alternative cost of owning a bike? a.900 PLN b.800 PLN c.700 PLN d.1000 PLNHere are the data for an asset that is being considered: Initial cost=$35,000 Salvage value at 5 years=$5000 Rebuild cost at 3 years=$25,000 Annual net cash flow=$22,000 per year What is the ROR for this asset? (You can use the excel function "IRR" for this problem) a)53.0% b)41.0% c)43.9% d)42.8%If the MARR=10%, compute the value of X that makes the alternatives equally desirable. Do not use spreadsheets. Alternatives Machine A Machine B First cost $12,000 $20,000 Annual Operating cost $1,400/year X Salvage value $2,000 $3,000 Life 4 years 8 years
- A company is trying to decide whether to keep a fork-truck in their factory or to purchase a new one. The existing fork-truck can be sold now for $28,000 or kept for another 5 years with an overhaul now costing $8,250. If the MARR is 10% should the company buy a new AVG now or keep the existing vehicle? Existing Fork-truck New Fork-truck Initial price cost, $ -34,250 (5 yrs ago) -38,250 AOC, $ -5,500 -7,800 Salvage value, $ 2,500 5,500 Life, yrs 10 12A vertical oil well has been drilled and completed. The productive zone is between the depths of 2,800 and 2,900 feet, you can assume there is oil in the entire thickness (gross = net). The average porosity is 10%, average water saturation is 20% and the oil formation volume factor is 1.3 RB/Stb. Other reservoirs with similar properties have drainage areas of 40 acres and the recovery factor 10.47305% (it is known with extreme precision!) a) Compute STOIIP and ultimate recovery, using the formals presented in lecture b) This well will also have a gas oil ratio (GOR) of 800 scf/bbl, how much gas is expected to be produced from this well?A decision has been made to perform certain repairs on the outlet works of a small dam. For a particular 36-inch gate valve, there are three available alternatives: A. Leave the valve as it is. B. Repair the valve. C. Replace the valve. If the valve is left as it is, the probability of a failure of the valve seats, over the life of the project, is 60%; the probability of failure of the valve stem is 50%; and of failure of the valve body is 40%. If the valve is repaired, the probability of a failure of the seats, over the life of the project, is 40%; of failure of the stem is 30%; and of failure of the body is 20%. If the valve is replaced, the probability of a failure of the seats, over the life of the project, is 30%; of failure of the stem is 20%; and of failure of the body is 10%. The present worth of cost of future repairs and service disruption of a failure of the seats is $10,000; the present worth of cost of a failure of the stem is $20,000; the present worth of cost of a…
- Lim Bon Fing Y Hermanos Inc has offered for sale its two-storey building in thecommercial district of Cebu City. The building contains two stores on the ground floor anda number of offices on the second floor.A prospective buyer estimates that if he buys this property, he will hold it for about 10years. He estimates that the average receipts from the rental during this period to beP350,000.00 and the average expenses for all purpose in connection with its ownershipand operation (maintenance and repairs, janitorial services, insurance, etc.) to beP135,000.00. He believes that the property can be sold for a net of P2,000,000 at the endof the 10th year. If the rate of return on this type of investment is 7%, determine thecash price of this property for the buyer to recover his investment with a 7% return beforeincome taxes.ANSWER: P2,526,768.61Walt Wallace Construction is investigating the purchase of a new dump truck with a 10 year useful life. Annual interest is 9%.The cash flows for two models are: Model Purchase price Annual Operating Cost Annual Income Salvage Value A $50,000 $2,000 $9,000 $10,000 B $80,000 $1,000 $12,000 $30,000 Using the EUAB analysis, which truck should be purchased and why? (Show your EUAB numbers for each option and explain the better choice.)Leonard Motors is trying to increase its international export business. It is considering several alternatives. Two were available earlier (per Problem 5.11), but a new one has recently been proposed by a potential internationally partnering corporation, which has funds to invest. Option 1: Equipment costs $900,000 now and another $560,000 in 2 years Annual M&O costs of $79,000 Life of project is 10 years Salvage value is nil Option 2: Subcontract production for annual payment of $280,000 for years 0 (now) through 10 Annual M&O cost is zero Life of project is 10 years Salvage value is nil Option 3: Costs are $400,000 in year 1 plus an additional 5% each year through year 5 Revenues are $50,000 per year for years 6 through 10 Life of project is 10 years Equipment salvage value is $100,000 paid in year 10 by international partner Due to stock market pressures, Leonard plans to change its MARR from its current 20% per year to 15% per year, compounded quarterly. Use PW analysis to…
