Two processes can be used for producing a poly- mer that reduces friction loss in engines. Process T will have a first cost of $750,000, an operating cost of $60,000 per year, and a salvage value of $80,000 after its 2-year life. Process W will have a first cost of $1,350,000, an operating cost of $25,000 per year, and a $120,000 salvage value after its 4-year life. Process W will also require updating at the

Two processes can be used for producing a poly- mer that reduces friction loss in engines. Process T will have a first cost of $750,000, an operating cost of $60,000 per year, and a salvage value of $80,000 after its 2-year life. Process W will have a first cost of $1,350,000, an operating cost of $25,000 per year, and a $120,000 salvage value after its 4-year life. Process W will also require updating at the

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 10E

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Kaneb is evaluating two alternative pipeline welders. Welder A costs $310,000, has a 7-year life, and is expected to generate net cash inflows of $78,000 in each of the 7 years. Welder B costs $320,000, has a 5-year life, and is expected to generate annual net cash inflows of $68,900 in each of the 5 years. Kaneb's cost of capital is 16%. Using the equivalent annual annuity method, which alternative should be chosen and what is its NPV?
2. Two methods can be used for injection molding insulin injection pens. Method A Molding costs $120,000 initially and will have a $30,000 salvage value after 5 years. The operating cost with this method will be $20,000 per year. Method B Molding will have a first cost of $150,000, an operating cost of $15,000 per year, and a $40,000 salvage value after its 6 - year life. Determine which method should be selected at a MARR of 10%. - Use Present Worth Analysis Solve in Excel
Seawater contains 2.1 pounds of magnesium per ton. By using the processingmethod A, 85% of the metal can be recovered at a cost of 3.25 per ton of water pumped andprocessed. If process B is used, 70% of the available metal is recovered, at a cost of only 2.60per ton of water pumped and processed. The two processes are substantially equal as toinvestment costs and time requirements. (a) If the extracted metal can be sold for 2.40 perpound, which processing method should be used? (b) At what selling price for the metal wouldbe two processes be equally economical?Answer with complete solution brief explanation. Thank you.
Two machines can be used to produce a part from titanium. The costs and other cash flows associated with each alternative are estimated. The salvage values are constant regardless of when the machines are replaced. Determine which alternative(s) should be selected for further analysis if alternatives must have a payback of 5 years or less. Perform the analysis with (a) i = 0%, and (b) i = 10% per year. Machine Semiautomatic Automatic First cost, $ −40,000 −90,000 Net annual income, $ per year 10,000 15,000 Maximum life, years 10 10 Salvage value, $ 0 0
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…
Solve, a. Compare the probable part cost from Machine A and Machine B, assuming that each will make the part to the same specification. Which machine yields the lowest part cost? Assume that the MARR = 10% per year. b. If the cost of labor can be cut in half by using part-time employees, which machine should be recommended?
Two processes are being considered for the production of a machine part. Process 1 requires an equipment cost of P180 000.00, a yearly operating cost of P90 000.00, and has zero salvage value at the end of its 6-year life. Process 2 has corresponding figures of P320 000.00, P72 000.00, P45 000.00 and 9-year life. If the applied MARR is 20%, compare the two processes using PW analysis. (Ans. PT1 = -P693 567.36; PT2= - P718 084.62)- Please use and actual formula NOT AN EXCEL PLEASE. We are students not office workers.
The Logan Well Services Group is considering two sites for storage and recovery of reclaimed water. The mountain site (MS) will use injection wells that cost $4.2 million to develop and $280,000 per year for M&O. This site will be able to accommodate 150 million gallons per year. The valley site (VS) will involve recharge basins that cost $11 million to construct and $400,000 per year to operate and maintain. At this site, 720 million gallons can be injected each year. If the value of the injected water is $3.00 per thousand gallons, which alternative, if either, should be selected according to the B/C ratio method? Use an interest rate of 8% per year and a 20-year study period. The B/C ratio is . Select alternative (Click to select) neither of the alternatives mountain site valley site .
4. Incremental ROR and B/C methods require the LCM of the two alternatives being compared. Select one: True False
There are two MEA machines that you are evaluating: Machine A has a lifetime of 6, an initial cost of €138642 and a positive salvage value of €29860. Machine B has a lifetime of 4, an initial cost of €182463, annual cost of €49000 and a positive salvage value of €14820. Your MARR is 0,17%. If you have selected Machine A, what is the maximum annual cost that this machine may have? (Do NOT use Excel.Show and explain All the steps. Need to learn for a test.)
A specialty concrete mixer used in construction was purchased for $300,000 7 years ago. Its annual O&M costs are $105,000. At the end of the 8-year planning horizon, the mixer will have a salvage value of $5,000. If the mixer is replaced, a new mixer will require an initial investment of $375,000. At the end of the 8-year planning horizon, it will have a salvage value of $45,000. Its annual O&M cost will be only $40,000 due to newer technology. Analyze this using an EUAC measure and a MARR of 15 percent to see if the concrete mixer should be replaced if the old mixer is sold for its market value of $65,000. a. Use the cash ﬂow approach (insider’s viewpoint approach) b. use the opportunity cost approach (outsiders viewpoint approach) Include formulas in excel screen shots.
A firm spent $2 million for new equipment that reduces greenhouse gases in their operations. The process improvement saved them $14,000 in the first month. (a) What is the first month’s rate of return on this investment? Express that value on an annual effective basis. (b) If this investment was judged not to make economic sense, should some entity pay to reduce such emissions? Who and why?