Question 6.2 1 You purchased an industrial oven five years ago for $80,000. O&M costs were $20,000 for this year but are expected to increase by $750 each year for the next five years. The current salvage value of the oven is $40,000 but expected to decrease by 10% in each of the following years of use (e.g. $36,000 after one year, $32,400 after two years, so on). At i = 10%, find the remaining economic life for this asset. A) 1 year B) 2 years C) 3 years D) Answers A, B and C are not correct

Question 6.2 1 You purchased an industrial oven five years ago for $80,000. O&M costs were $20,000 for this year but are expected to increase by $750 each year for the next five years. The current salvage value of the oven is $40,000 but expected to decrease by 10% in each of the following years of use (e.g. $36,000 after one year, $32,400 after two years, so on). At i = 10%, find the remaining economic life for this asset. A) 1 year B) 2 years C) 3 years D) Answers A, B and C are not correct

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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ASAP Suppose a company has a forklift but is considering purchasing a new electric-lift truck that would cost $18,000, have operating costs of $1,000 in the first year, and have a salvage value of $10,000 at the end of the first year. For the remaining years, operating costs increase each year by 15% over the previous years operating costs. Similarly, the salvage value declines each year by 25% from the previous year's salvage value. The lift truck has a maximum life of three years. The firm's required rate of return is 15%. Find the economic service life of this new machine.
A company is considering purchasing a machine for manufacturing that costs $30,000. The salvage value and O&M costs for the next 7 years is given in the following table. The Equivalent Uniform Annual Cost (EUAC) is computed for each year assuming the equipment was sold at the end of that year and a MARR of 6%. What is the optimal economic life of the machine? Yr Salvage Value O&M Costs EUAC 1 $15,000 $1,200 $18,000 2 $14,400 $2,100 $11,909 3 $13,800 $3,000 $10,753 4 $13,200 $3,900 $10.825 5 $12,600 $4,800 $11,382 6 $12,000 $5,700 $12,178 7 $11,400 $6,600 $13,106
Consider a five-year MACRS asset, which can be purchased at $80.000. Thesalvage value of this asset is expected to be $42,000 at the end of three years.What is the amount of gain (or loss) when the asset is disposed of at the end of three years?(a) Gain $11,280(b) Gain $9,860(c) Loss $9,860(d) Gain $18,960
A firm is considering purchasing a machinethat costs $65,000. It will be used for six years, andthe salvage value at that time is expected to be zero.The machine will save $35,000 per year in labor, butit will incur $12,000 in operating and maintenancecosts each year. The machine will be depreciatedaccording to five-year MACRS. The firm’s tax rateis 40%, and its after-tax MARR is 15%. Should themachine be purchased?
A Civil Engineer is considering establishing his own company. An investment of $4,000,000 will berequired, which will be recovered in 15 years.It is estimated that revenue will be $8,000,000 per year and that operating expenses will be as follows:Materials $1,600,000 per yearLabor $2,800,000 per yearOverhead $400,000 + 10% of the yearly revenueOther expenses $600,000 per yearThe engineer will give up his regular job paying $2,160,000 per year and devote his time fulltime to theoperation of the business; this will result in decreasing labor costs by $400,000 per year, material costs by$280,000 per year and overhead cost by $320,000 per year. If the man expects to earn at least 20% ofhis capital, should he invest? NOTE: Use Annual Worth Method.
As a challenger to the forklift truck described in Example 12.1, consider a new electric forklift truck that would cost $20,000, have operating costs of $6,000 in the first year, and have a salvage value or $14,000 at the end of the first year. For the remaining years, operating costs (including any loss of productivity due to maintenance) increase each year by 25% over the previous year's operating costs. Similarly, the salvage value declines each year by 30% from the previous year's salvage value. The truck has a maximum life or eight years without any major engine overhaul. The firm's required rate of return is 12%. Find the economic service life of this new machine without considering any income taxes.
Show the solutions in a step-by-step manner. 1. A certain building has a salvage value of P1,000,000 after 40 years. Annual depreciation is P2,000,000. Using the Straight Line Method, how many years should you sell the building for P30,000,000? 2. A machine costs P2,500,000. At the end of its economic life of six years, its salvage value is P800,000. Using the Sum of the Years Digit Method of Depreciation, what will be its book value for the first year? Prepare a depreciation schedule. plz answer dont answer by pen paper
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4. ABY company purchased a new CNC machine for $100,000. The market value of the new machine in each year is given in the table below. Annual operating and maintenance costs will be $30.000 per year. MARR is 12% per year. a) Calculate the marginal cost of the new CNC machine in years I to 4. b) Determine the economic life of new CNC machine.
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uppose that you purchased a HVAC system five years ago for $75, 000. The O&Mcosts are $15, 000 this year and are expected to increase by $1, 000 each year for the next five yearsthen remain the same for the following years.The current salvage value of the system is $15, 000; salvage value after one year is estimated tobe $12, 000; after two years, $11, 000; after three years, $10, 000; after four years, $9, 000; and so on.A new industrial HVAC system is available for purchase at a price of $95, 000, including instal-lation. The market value of the new system will decrease at a rate of 15% each year. The O&Mcosts are expected to be $1, 000 in the first year, and will increase at a rate of 20% each year. Themaximum service life of the new system is 10 years. Assume that your company uses an interestrate of 10% for all project evaluations.(a) Find the remaining economic life of the currently owned asset.(b) What is the economic service life of the new system?(c) Use the…
You purchased a molding machine at a cost of $88,000. It has an estimateduseful life of 12 years with a salvage value of $8,000. Determine the following·:(a) The amount of annual depreciation computed by the straight-line method.(b) The amount of depreciation for the third year computed by using the double-declining-balance method.