With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal co that of machine Y at an interest rate of 11% per year. Determine the replacement value. Machine X Machine Y Market Value, $ ? 82,000 -40,000 for year 1,increasing by 2000 per year thereafter. Annual Cost, $ per Year -58,000 Salvage Value Life, Years 10,500 23,000 3 The replacement value is $

With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal co that of machine Y at an interest rate of 11% per year. Determine the replacement value. Machine X Machine Y Market Value, $ ? 82,000 -40,000 for year 1,increasing by 2000 per year thereafter. Annual Cost, $ per Year -58,000 Salvage Value Life, Years 10,500 23,000 3 The replacement value is $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 $ .
An asset for drilling was purchased and place in service by a petroleum production company. Its initial investment is P60,000 and it has an estimated salvage value of P12,000 at the end of an estimated useful life of 14 years. Compute the book value at the end of the 5th year of life using SLM. a. P48,257.00 b. P42,857.00 c. None of the above d. P45,572.00
Anew forklift truck will require an investment of $30,000 and is expectedto have end-of-year market values and annual expenses as shown in the Table below.If MARR (before tax) is 10% per year, Önd the Economic Service Life of the truck.Market Value Annual ExpensesEnd of year at end of year during year1 $22,500 $3,0002 $16,875 $4,5003 $12,750 $7,0004 $9,750 $10,0005 $7,125 $13,000 please dont use excell
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
2. One year ago, a machine was purchased at a cost of $2,000, to be used for 6 years.However, the machine has failed to perform properly and has a cost of $500 per year forrepairs, adjustments, and shutdowns. A new machine is available to accomplish thefunctions desired and has an initial cost of $3,500. Its maintenance costs are expected tobe $50 per year during its service of 5 years. The approximate market value of the presentmachine has been roughly $1,200. If the operating cost (other than maintenance) for bothmachines are equal, show whether it is economical to purchase the new machine. Performa before-tax study, using an interest rate of 12% and assume that the salvage values will benegligible.
A harvester was purchased 4 years ago for $100,000. The current market value is $45,000, which will decline as follows over the next 5 years: $40,000, $33,500, $28,000, $24,000, and $17,000. The O & M costs are estimated to be $16,000 this year. These costs are expected to increase by $5000 per year starting year 2. MARR = 10% The foregone interest in year 4 is _______________.
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…
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.
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.
A lift truck priced at $38,000 is acquired bytrading in a similar lift truck and paying cash for theM09_PARK9091_06_GE_C09.indd 506 10/22/15 5:16 PMProblems 507remaining balance. Assuming that the trade-in allowance is $9,000 and the book value of the asset tradedin is $7,808, what is the cost basis of the new assetfor the computation of depreciation for tax purposes?
Economic Life Exercises1. A machine costs $ 10,000 and is expected to be scrapped for $ 1,500 inthe moment he retires. Operating expenses for the first year are expected to be $ 3,500 and increasing by $ 400 as a result of the impairment; and operating income Estimated $ 20,000 If the MARR is 15%, determine the economic life of the machine.