The replacement of a planning machine is being considered by the Reardon Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $25,000 for installation and will have an estimated economic life of 14 years and a $1,500 MV at that time. It is estimated that annual expenses will average $16,000 per year. The defender has a present BV of $5,500 and a present MV of $4000. Data for the defender for the next three years are given below. Using a before-tax interest rate of 12% per year, make a comparison to determine whether it is economical to make the replacement now. Year MV at End of BV at End of Expenses during Year 1 $3,000 Year $4,125 the Year $20,000 2 2,750 2,750 26,000 3 2,500 1,375 32,000 Click the icon to view the interest and annuity table for discrete compounding when i = 12% per year. Fill in the table for the EUAC values for the defender for years 1-3. (Round to the nearest dollar.) Year EUAC 1 2 3

The replacement of a planning machine is being considered by the Reardon Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $25,000 for installation and will have an estimated economic life of 14 years and a $1,500 MV at that time. It is estimated that annual expenses will average $16,000 per year. The defender has a present BV of $5,500 and a present MV of $4000. Data for the defender for the next three years are given below. Using a before-tax interest rate of 12% per year, make a comparison to determine whether it is economical to make the replacement now. Year MV at End of BV at End of Expenses during Year 1 $3,000 Year $4,125 the Year $20,000 2 2,750 2,750 26,000 3 2,500 1,375 32,000 Click the icon to view the interest and annuity table for discrete compounding when i = 12% per year. Fill in the table for the EUAC values for the defender for years 1-3. (Round to the nearest dollar.) Year EUAC 1 2 3

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

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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.
An $80,000 baling machine for recycled paper was purchased by the XYZ company two years ago. The current MV of the machine is $50,000, and it can be kept in service for seven more years. MARR is 12% per year and the projected net annual receipts (revenues less expenses) and end-of-year market values for the machine are shown below. When is the best time for the company to abandon this project? END OF YEAR 1 2 3 4 5 6 7 Net annual receipts $20,000 $20,000 $18,000 $15,000 $12,000 $6,000 $3,000 Market value 40,000 32,000 25,000 20,000 15,000 10,000 5,000
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 present unit which they run during brownouts. The new set would cost P135,000 with a five (5) year-life, and no estimated salvage value. Variable cost would be P150,000 a year. The present generating set has a book value of P75,000 and a remaining life of 5 years. Its disposal value now is P7,500, but it would be zero after 5 years. Variable operating cost would be P187,500 a year. Money is worth 10%. Which is profitable, to buy the new generator set or retain the present set? Support your answer by showing your computation and tables.
An existing robot can be kept if $2,000 is spent now to upgrade it for future service requirements. Alternatively, the company can purchase a new robot to replace the old robot. The following estimates have been developed for both the defender and the challenger. Defender Challenger Current MV…
Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System A costs $275,000, has a 4-year life, and requires $81,000 in pretax annual operating costs. System B costs $355,000, has a 6-year life, and requires $75,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Suppose the company always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 22 percent and the discount rate is 9 percent. Calculate the EAC for both conveyor belt systems. Please lay out initial input of the problems and your calculations of cash flow, NPV, and EAC in an excel format.
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.
Your company is considering the introduction of a new product line. The initial investment required for this project is $500,000, and annual maintenance costs are anticipated to be $45,000. Annual operating costs will be directly proportional to the level of production at $8.50 per unit, and each unit of product can be sold for $65. If the MARR is 15% and the project has a life of 5 years, what is the minimum annual production level for which the project is economically viable? Use the AW method.
Menkin’s Tools produces low-cost steel tools. One of their most popular tools is a steel wrench that comes in three sizes. Each of the three wrenches is forged in hydraulic presses. Data for the forging presses are given below? FC VC SP A $ 200,000 $ 6.00 $ 20.00 B $ 150,000 $ 4.50 $ 18.00 C $ 275,000 $ 3.25 $ 15.00 What is the breakeven point (in units) for Press A? 10,657 11,111 12,432 14,286 What is the breakeven point (in units) for Press B? 10,657 11,111 12,432 13,346 What is the breakeven point (in units) for Press C? 14,896 18,865 20,960 23,404
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.
An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated MV of $12,000 at the end of an estimated useful life of 14 years. Compute thedepreciation amount in the third year and the BV at the end of the fifth year of life by each of these methods: Solve, a. The SL method. b. The 200% DB method with switchover to SL. c. The GDS. d. The ADS.
Your company is considering the introduction of a new product line. The initial investment required for this project is $500,000, and annual maintenance costs are anticipated to be $45,000. Annual operating costs will be directly proportional to the level of production at $8.50 per unit, and each unit of product can be sold for $65. If the MARR is 15% and the project has a life of 5 years, what is the minimum annual production level for which the project is economically viable? The equipment can be sold for $80,000 at the end of five years.