Two alternative designs are being considered for a pet-exercising treadmill. The company's MARR is 18%. The cash flows associated with each are given in the Following table. The Judas The Lancelot Capital Investment Annual Revenues Annual Expenses Refurbishment Cost at EOY 5 $120,000 $50,000 $135,000 $50,000 $20,000 $0 $15,000 $0 $4,000 Market Value after 10 years $40,000 IRR 22.8% 22.6%

Two alternative designs are being considered for a pet-exercising treadmill. The company's MARR is 18%. The cash flows associated with each are given in the Following table. The Judas The Lancelot Capital Investment Annual Revenues Annual Expenses Refurbishment Cost at EOY 5 $120,000 $50,000 $135,000 $50,000 $20,000 $0 $15,000 $0 $4,000 Market Value after 10 years $40,000 IRR 22.8% 22.6%

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 five-year project has an initial fixed asset investment of $613,600, an initial net working capital investment of $22,200. The project will have an annual operating cash flow (OCF) of (-$76,540). The fixed asset is fully depreciated over the life of the project and has no salvage value. The net working capital will be recovered when the project ends. The required return is 11.7 percent. What is the project's equivalent annual cost, or EAC? O-$248,052.76 O-$182,309.18 O-$147,884.01 O $242,212.22
1. A machine cost P10M and will have scrap value of 10% of the first cost at theend of 10 years. If money is worth 12%. Find the annual investment and thecapitalized cost of the machine.
An investment firm plans to erect 200 wind turbines at a cost of $1.69 million each. The following input information is available:• Power capacity per turbine: 1,550 kW• Project life: 20 years• Salvage value after 20 years: 0• Annual maintenance: $16,300 per turbine• Selling price: $0.034 /kWh• Tax credit: $0.018 /kWh• MARR: 10%• Average load factor: 35%A. Calculate the IRRB. Calculate the NPVC. Will the company proceed
XYZ company has been presented with an opportunity to invest in a project for 10 years. If management expects to make 10% on its investments before taxes, would you recommend this project? Use exact IRR The facts on the project are presented below Investment Required = $60,000,000 Annual Gross Income = $14,000,000 Annual Operating Costs = S 5,500,000 Salvage value after 10 years = 0 Find IRR = ?
A new machine costs $899,090 and falls in a 29.50% CCA class. The machine will have zero value after 5 years of use but will save $417,680 annually in operating costs before taxes in those five years. Assume a tax rate of 34.17%. Using a required return of 15.11%, what is the equivalent annual cost (EAC) of the machine purchase, considering the annual cash flow, initial purchase, and CCA tax shield? Options $59,682 $61,252 $62,823 $64,393 $65,964
A Veterans Administration (VA) hospital isto decide which type of boiler fuel system will mostefficiently provide the required steam energy outputfor heating, laundry, and sterilization purposes. Thecurrent boilers were installed in the early 1950s andare now obsolete. Much of the auxiliary equipmentis also old and in need of repair. Because of thesegeneral conditions, an engineering recommendationwas made to replace the entire plant with a new boilerplant building that would house modern equipment.The cost of demolishing the old boiler plant wouldbe almost a complete loss, as the salvage value of thescrap steel and used brick was estimated to be onlyabout $1,000. The VA hospital’s engineer finallyselected two alternative proposals as being worthyof more intensive analysis. The hospital’s annualenergy requirement, measured in terms of steam output, is approximately 145,000,000 pounds of steam.As a rule of thumb for analysis, 1 pound of steam isapproximately 1,000 Btu, and 1 cubic foot…
Hajia Timber Ltd (GTL) produces and exports lumber and planks. It owns a plant whichhas value of GHC 1,800,000 as at 1 January 2010. The government of Ghana,passes alegislation that restricts the exportation of lumber. Consequently GTL has to reduceproduction by 40%. Cash flow forecast for the next five years included in the budgetsubmitted for management approval in January 2010 shows the following:Year Cash flows (GHC)2010 552,0002011 506,0002012 376,0002013 250,0002014 560,000The cashflow forecast for 2014 includes expected proceeds from disposal of the plant. Thecash flow projections also ignore the effects general upwards movement in prices.It is estimated that if the plant is sold in January 2010, it would realize the net proceeds ofGHC 1,320,000. The costs of capital for GBL is 15% (ignoring inflationary effect)RequiredCalculate the recoverable amount of the plant and impairment loss (if any).
3. The Ajax Corporation has an overhead crane thathas an estimated remaining life of 10 years. The cranecan be sold now for $8,000. If the crane is kept in service,it must be overhauled immediately at a cost of $5,000.Operating and maintenance costs will be $3,000 peryear after the crane is overhauled. The overhauled cranewill have zero MV at the end of the 8-year study period.A new crane will cost $20,000, will last for 8 years,and will have a $4,000 MV at that time. Operating andmaintenance costs are $1,000 per year for the new crane.The company uses a before-tax interest rate of 10% peryear in evaluating investment alternatives. Should thecompany replace the old crane?
Your company is considering the introduction ofa new product line. The initial investment required forthis project is $500,000, and annual maintenance costsare anticipated to be $45,000. Annual operating costswill be directly proportional to the level of productionat $8.50 per unit, and each unit of product can be soldfor $65. If the MARR is 15% and the project has a life of5 years, what is the minimum annual production levelfor which the project is economically viable? With Cash Flow Thank You
3. One of four ovens at the bakery is being considered for replacement. Its salvage value and maintenance costs are given in the table below for several years. A new oven costs P80,000 and this price includes a complete guarantee of the maintenance costs for the first two years, and it covers a good proportion of the maintenance costs for 3 years and 4 years. The salvage value and maintenance costs are summarized in the table below. Both the old and new ovens have similar productivities and energy costs. Should the oven be replaced this year if the MARR equals to 10%?
These data were derived from a forest inventory and are to be used to calculate the best (most revenue return) rotation. The manager wishes to maximize net income and has the following information: Establishment Costs: $175/acre Thinning and burning at age 17 cost: $75 Stumpage sells for: $41/unitvol MAR: 6.7% Annual Expenses: $8/acre Inventory Data over Life of the Forest Stand (Ages 0-60 years) Stand age (vol/acre) 15 5.13 20 13.98 25 25.22 30 35.11 35 44.19 40 51.85 45 56.79117447 50 63.03092644 55 68.76322479 60 74.05934015
14.28 A new toll bridge is to be constructed over the Green River at a cost of $120M. The bridge requires maintenance costing $4000 annually over its 50-year life. Every 10 years, the bridge will require repainting at a cost of $1M. The value to motorists using this bridge is estimated to be $1.60 per trip. If the interest rate is 10% and 25,000 vehicles per day travel over the bridge, how much toll should be charged for each crossing? Rounding that toll up to the nearest nickel, what is the consumers’ surplus? 14.29 A dam may be built at a cost of $10M to elimi- nate the periodic flooding that Lowville experi- ences. That flooding averages a cost of $300K per year. Additional expenses can be incurred to divert water to another area for irrigation, to add electric power generation, and to permit recre- ation. Which alternative is best? Since political support is crucial, allocate the costs to the uses. The…