Please do 8-38 8-38AWhich alternative should be selected? Use achallenger-defender rate of return analysis.The New England Soap Company is consideringadding some processing equipment to the plant toaid in the removal of impurities from some rawmaterials. By adding the processing equipment,the firm can purchase lower-grade raw material atreduced cost and upgrade it for use in its products.Four different pieces of processing equipmentwith 15-year lives are being considered:ABCDInitial investment $8,500 $18,500 26,500 $30,000Annual saving in 3,500 6,000 7,400 9,000materials costsAnnual operating 2,100 3,000 3,200 4,100costThe company can obtain a 13% annual return on itsinvestment in other projects and is willing to investmoney on the processing equipment only as long as it can obtain 14% annual return on each incrementof money invested. Which one, if any, of the alterna-tives should be selected? Use a challenger-defenderrate of return analysis.Cash vs. Loan vs. Lease-39 Frequently we read in the newspaper that one shouldlease a car rather than buying it. For a typical 24-month lease on a car costing $9400, the monthlylease charge is about $267. At the end of the 24months, the car is returned to the lease company(which owns the car). As an alternative, the same carcould be bought with no down payment and 24 equalmonthly payments17% nominalwith

Given information There are 4 projects: A,B,C and D For project A Initial investment: $8500 Annual…

The New England Soap Company is considering adding some processing equipment to the plant to aid in the removal of impurities from some raw materials. By adding the processing equipment, the firm can purchase lower-grade raw material at reduced cost and upgrade it for use in its products. Four different pieces of processing equipment

The New England Soap Company is considering adding some processing equipment to the plant to aid in the removal of impurities from some raw materials. By adding the processing equipment, the firm can purchase lower-grade raw material at reduced cost and upgrade it for use in its products. Four different pieces of processing equipment

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Use Formula, not the table. Your company is environmentally conscious and is looking at two heating options for a new researchbuilding. What you know about each option is below, and your company will use an annual interest rate of 8%for this decision: Gas Heating Option: The initial equipment and installment of the natural gas system would cost $225,000 rightnow. The maintenance costs of the equipment are expected to be $2,000 per year, starting next year, for eachof the next 20 years. The energy cost is expected to be $5,000, starting next year, and is expected to rise by 5%per year for each of the next 20 years due to the price of natural gas increasing. Geothermal Heating Option: Because of green energy incentives provided by the government, the geothermalequipment and installation are expected to cost only $200,000 right now, which is cheaper than the gas lines.There would be no energy cost with geothermal, but because this is a relatively newer technology, themaintenance costs…
An electric cooperative is considering the use of a concrete electric pole in the expansion of its powerdistribution lines. A concrete pole costs 18,000 each and will last 20 years. The company is presentlyusing creosoted wooden poles which cost 12,000 per pole and will last 10 years. If money is worth 12percent, which pole should be used? Assume annual taxes amount to 1 percent of the first cost and zerosalvage value in both cases. Determine the best alternative using: (i = 12%)a. Annual Cost (AC) Methodb. Equivalent Uniform Annual Cost (EUAC) Methodc. Present Worth Cost (PWC) Method
The survey firm of Layer, Anderson, and Pope (MAP) LLP is considering the purchase of a pieceof new GPS equipment. Data concerning the alternative under consideration are presented below.First Cost $28,000Annual Income 7,000Annual Costs 2,500Recalibration at end of Year 4 4,000Salvage Value 2,800If the equipment has a life of eight years and MAP’s minimum attractive rate of return (MARR) is5%, what is the annual worth of the equipment?
a company is considering the purchase of a new Lathe, where there are 3 alternative Lathes with brands D, E and F with economic value for each Lathe as follows; Lathe Machine D Lathe Machine E Lathe Machine F Initial Cost (Million Rp) 530 540 480 Maintenance Cost (MillionRp) 90 80 100 Residual Value (Million Rp) 60 130 80 Operating Life 10 10 10 Question: Do a Present Worth Analysis to be able to determine the Alternative chosen from the three Generators with MARR = 13%?
A company would like to invest on a project. The rate the company uses to justify their investments, i.e. the MARR is 25% per year (compounded yearly). Their estimations about the projects are as follows: Initial Cost: ($300,000)The Study Period: 15 yearsSalvage (Market) Value of the Project: 20% of the initial cost 1-) What is the capital recovery cost, CR? 2-) Operating costs in the first year are estimated to be ($7,500) and these operating costs are estimated to increase by 5% per year. Construct cash flow table and determine the minimum amount of annual revenue ($ per year?) that makes this investment an attractive option for the company? (i.e. what is Equivalent UNIFORM (Annual) Cost, EU(A)C?) 3-) Benefits in in the first year are estimated to be $30,000 and these benefits are estimated to increase by 13% per year. Construct cash flow table and determine the net present value/worth of the project, NPW. 4-) What is the simple payback period? 5-) Determine IRR of…
Calisto Launch Services is an independent space corporation and has been contracted to develop and launch one oftwo different satellites. Initial equipment will cost $750,000 for the first satellite and $850,000 for the second.Development will take 5 years at an expected cost of $150,000 per year for the first satellite; $120,000 per year forthe second. The same launch vehicle can be used for either satellite and will cost $275,000 at the time of the launch5 years from now. At the conclusion of the launch, the contracting company will pay Calisto $2,500,000 for eithersatellite.Calisto is also considering whether they should consider launching both satellites. Because Calisto would haveto upgrade its facilities to handle two concurrent projects, the initial costs would rise by $150,000 in addition to thefirst costs of each satellite. Calisto would need to hire additional engineers and workers, raising the yearly costs to atotal of $400,000. An additional compartment would be added to…
A second hand boiler is purchase in the amount of ₱ 210,000 with a useful life of 5 years and asalvage value of ₱ 20,000, compute its capitalized cost if interest is 15% compounded annually.
Sean Bell invested $10,000 in a blue chip stock five years ago and paid a commission of $90. He sold it today for $14,192.20 (after commission), exactly 5 years and 4 months since the stock was bought. Determine the rate of return on this investment. Group of answer choices 6.61% 7.2% None of these 6.78%
Bailey, Inc., is considering buying a new gang punch that would allow it to produce circuit boards more efficiently. The punch has a first cost of $100,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs would increase $2,000 using the gang punch, but annual raw material costs would decrease $12,000. MARR is 5%/ year. Solve, a. What is the future worth of this investment? b. What is the decision rule for judging the attractiveness of investments based on future worth? c. Should Bailey buy the gang punch?
The cost of the extending a certain road at Yellowstone National Park is $1.7 million. Resurfacing and other maintenance are expected to cost $350,000 every 3 years with an interest rate of 6% per year. a) What is the Annual Worth based capitalized cost of the road? b) How will the answer (a) change if its Salvage is expected to be $3 million at the end of its useful Life?
What is the future value of $4500 per year for 10 years invested at 5%? * a. $56,600 b. $7,330 c. $45,000 d. $38,908
A design change being considered by Mayberry, Inc., will cost $6,000 and will result in an annual savings of $1,000 per year for the 6-year life of the project. A cost of $2,000 will be avoided at the end of the project as a result of the change. MARR is 8%/yr. Solve, a. What is the internal rate of return of this investment? b. What is the decision rule for judging the attractiveness of investments based on internal rate of return? c. Should Mayberry implement the design change?