The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent theAW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $-95,000 for each of the 5years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently ownedwill always be available.(a) What is the ESL and associated AW of the defender at a MARR of 12% per year?(b) A challenger with an ESL of 7 years and an AWC = $-87,000 per year has been identified. Which AW will be less for the respectiveESL periods?Retention Period, YearsAW Value, $ per Year1-80,000-93,0003.-82,0004-92,000-95,000a) The ESL of the defender isyear(s) with the lowest AW of Sb) The defenderhas the lower AW at Sfor n equal to

In this problem the AW value or the Annual Worth value of retaining a machine for extra number of…

Answered: The AW values for retaining a presently…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The management of Brawn Engineering is considering three alternatives to satisfy an OSHA requirement for safety gates in the machine shop. Each gate will completely satisfy the requirement, so no combinations need to be considered. The first costs, operating costs, and salvage values over a 5-year planning horizon are shown below. End of Year Gate 1 Gate 2 Gate 3 0 -$15,000 -$19,000 -$24,000 1 -$6,500 -$5,600 -$4,000 2 -$6,500 -$5,600 -$4,000 3 -$6,500 -$5,600 -$4,000 4 -$6,500 -$5,600 -$4,000 5 -$6,500 + $0 -$5,600 + $2,000 -$4,000 + $5,000 What is the future worth of each alternative?
The management of Brawn Engineering is considering three alternatives to satisfy an OSHA requirement for safety gates in the machine shop. Each gate will completely satisfy the requirement, so no combinations need to be considered. The first costs, operating costs, and salvage values over a 5-year planning horizon are shown below. End of Year Gate 1 Gate 2 Gate 3 0 -$15,000 -$19,000 -$24,000 1 -$6,500 -$5,600 -$4,000 2 -$6,500 -$5,600 -$4,000 3 -$6,500 -$5,600 -$4,000 4 -$6,500 -$5,600 -$4,000 5 -$6,500 + $0 -$5,600 + $2,000 -$4,000 + $5,000 Show the comparisons and internal rates of return used to make your decision:Comparison 1: (Gate 1 versus Gate 3 or Gate 2 versus Gate 3 or Gate 2 versus Gate 1?) IRR 1: %Comparison 2: (Gate 1 versus Gate 2 or Gate 2 versus Gate 3 or Gate 3 versus Gate 1?) IRR 2: Using an internal rate of return…
A certain operation is now performed by hand, the labor cost per unit is P 54 and annual fixed charge for tool use is P 10,000. A machine that is considered for this job will coast P 240,000, and have a salvage value of P 10,000 at the end of its 6 - year life. With it labor cost is P 22 per unit and annual fixed charge is P 20,000. At what number of units per year, at zero interest, will the cost of the two methods break even? Select one: a. 1,150 b. 1,105 c. 1,501 d. 1,510
Corrosive liquids are transported through pipes in a factory . Ordinary pipes will have an installedcost of P30,000 and their useful life is 3 years . Stainless steel pipes are higly resistant to the corrosive effectof the liquids and are being considered as an alternative . These pipes are estimated to have an installed costof P55,000 . Salvage value is zero in each case . If money is worth 8% and assuming replacement costs to be thesame as the original prices , what should be the useful life of the stainless steel pipes to have equal capitalizedcost as the ordinary pipes? A) 5.3 years C) 5.9 yearsB) 5.6 years D) 6.2 years
The First cost of a passenger bus is ₽800,000. Its estimated life is 4 years with no salvage value. The operating cost per year of 300 days of operation are as follows: Tires, ₽24,000; gasoline, 60 liters per day at ₽15 per liter; Oil,₽80 per day; maintenance and repair, ₽40,000; labor ₽800 per day; miscellaneous expense, ₽18,000; depreciation, sinking fund at 10%. If the average passenger fare is ₽3.50 for each passenger one way and expected profit or return is 15% determine the minimum average number of passengers that should be transported each day. Use the AW method and Future worth method.
A Machine costs ₱80,000 and an estimated life of 10 years with a salvage value of ₱5,000. What is the book value after 5 years using Sum of the Years Digit Method. Answer: BV5=₱25,454.5Show Solution
Economics A commercial 3D printer is purchased for $310,000. The salvage value of the printer decreases by 45% each year that it is held. The cost to operate and maintain the machine the first year it is used is $12,000; these costs increase by $5,500 each year. What is the optimal replacement interval and minimum EUAC for the printer, assuming a MARR of 11% is used? ORI: years EUAC*: $
The mining company is considering purchasing a machine which costs $30000 and is expected to last 12 years with a $3000 Salvage value. The annual operating expenses are expected to be $9000 for the first 4 years, but owing to decreased use, the operating costs will decrease by $400 per year for the next 8 years. Alternatively, the company can prirchase a highly automated machine at a cost of $58000. This machine will last only 6 years because of its high technology. and delicate design, and its salvage value will be $15000. Because it it is so automated, its operating cost will be only $4.000 per year. If the company's minimum attractive fate of return is 20% per year, which Machine should be selected on the basis of present worth analysis?
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 = $5,000
The purchase of a motor for P6000 and a generator for P4000 will allow a company to produce its own energy. The configuration can be assembled for P500. The service will operate for 1600 hrs per year for 10yrs. The maintenance cost is P300 per year and the cost to operate is P0.85/hour for fuel and related costs. Using straight line depreciation, what is the annual cost(P) for the operation? There is P400 in salvage value for the system at the end of 10yrs.
Show your complete solution. 19. A machine cost 7,350 has a life of 8 years and has a salvage value of 350 at the end of a years. Determine its book value at the end of 4 years using Constant- Percentage of Declining Value.
A building supplies distributor purchased a gasoline-powered forklift truck 4 years ago for $8,000. At that time, the estimated useful life was 8 years with a salvage value of $800 at the end of this time. The truck can now be sold for $2,500. For this truck, average annual O&M expenses for year j have been Cj = $2, 000 + $400(j − 1) Now the distributor is considering the purchase of a smaller battery-powered truck for $6,500. The estimated life is 10 years, with the salvage value decreasing by $600 each year. Average annual O&M expenses are expected to be $1,200. If a MARR of 10% is assumed and a 4-year planning horizon is adopted, based on an annual worth cash flow approach should the replacement be made now?

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