Salim Service company owns several taxis that were purchased four years ago for$27000 each. The current market value is $10000 each. If they are kept for another6 years, they can be sold for $2000 each. The annual maintenance cost per cab is$900 a year. Salim Service is looking at replacing the cabs with the option to leasenew cabs at an annual cost of $9000 per year per cab which includes freemaintenance. How much more would it cost them per year to switch to leasing?Assume an interest rate of 9%.

The objective of the question is to calculate the annual cost difference between keeping the…

Answered: Salim Service company owns several…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A presently owned machine has the projected market value and M&O costs shown below. At an interest rate of 10% per year, the AW for keeping the machine 2 more years is closest to: (a) $29,650 (b) $32,840 (c) $35,770 (d ) $39,720 Year Market Value, $ M&O Cost, $ 0 32,000 — 1 25,000 24,000 2 14,000 24,000 3 10,000 26,000 4 8,000 29,000
Give typing answer with explanation and conclusion A piece of equipment has a first cost of $175,000, a maximum useful life of 7 years, and a market (salvage) value described by the relation S = 120,000 – 11,000k, where k is the number of years since it was purchased. The salvage value cannot go below zero. The AOC series is estimated using AOC = 60,000 + 14,000k. The interest rate is 12% per year. Determine the economic service life and the respective AW. The AW at the Economic Service Life, (in $)
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
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)
The sprayer's base price is $900,000, and it would cost another $21,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $510,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $15,500. The sprayer would not change revenues, but it is expected to save the firm $348,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar.
The following cost and benefit information has been estimated for a pump that has a 10-year useful life. Purchase Cost = $2,400 Annual Operating Cost = $1,200 Annual Maintenance Cost = $300Annual Benefits = $2,000Salvage Value = $200Interest rate specified = 9% or 0.09 Find the capital recovery cost for this pump.
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.
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
With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal to that of machine Y at an interest rate of 11% per year. Determine the replacement value. Machine X Machine Y Market Value, $ ? 92,000 Annual Cost, $ per Year −60,000 −40,000 for year 1,increasing by 2000 per year thereafter. Salvage Value 11,500 16,000 Life, Years 3 5 The replacement value is $ .
A chemical process in your plant leaves scale deposits on the inside of pipes. The scale cannot be removed, but increasing the pumping pressure maintains flow through the narrower diameter. The pipe costs $35 per foot to install, and it has no salvage value when it is removed. The pumping costs are $8 per foot of pipe initially, and they increase annually by $7.50 per year starting in Year 2. What is the economic life of the pipe if the interest rate is 12%?
Engineering Economics (Replacement Analysis): Please answer the following provide explaination and Solution Clin Corporation has an overhead crane that has an estimated remaining life of 10 years. The crane can be sold now for ₱800,000. If the crane is kept in service, it must be overhauled immediately at the cost of ₱400,000. Operating and maintenance costs will ₱300,000 per year after the crane is overhauled. The overhauled crane will have zero market value at the end of the 10-year study period. A new crane will cost ₱1.8M and can last for 10 years with a market value of ₱400,000 at that time. Operating and maintenance costs are ₱100,000 per year for the new crane. The company uses an after-tax interest rate of 10% per year in evaluating investment alternatives. Should the company replace the old crane?

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