You purchased a CNC machine for $50,000. It is expected to have a useful life of 8 years and a salvage value of $4,000. At i = 12%, what is the annual capital cost of this machine?
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You purchased a CNC machine for $50,000. It is expected to have a useful life of 8 years and a salvage value of $4,000. At i = 12%, what is the annual capital cost of this machine?
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- A company is considering constructing a plant to manufacture a proposed new product. The land costs $300,000, the building cost $600,000, the equipment costs $250,000, and $100,000 additional working capital is required. It is expected that the product will result in sales of $750,000 per year for 10 years ,at which the land can be sold for $400,000, the building for $350,000, and the equipment for $50,000 and all of the working capital would be recovered at EOY10. The annual expense for labor, materials, and all other items are estimated to total $500,000 and will decrease by 20,000 per year until year 10. If the company requires a MARR of 12% per year on projects of comparable risk, determine if it should invest in the new product line. a) Use IRR and AW method. b) Determine the simple and payback period draw the cash flow diagram and write a conclusionA company needs to acquire a machine to increase its production. To do so, you will need to make an initial investment of $150,000. Furthermore, the use of the machine will result in annual operating and maintenance costs of around 2,500.00, for a useful life of 10 years and a residual value of %30,000. At the end of 4 and 8 years, it requires revisions that cost $20,000 and $10,000 respectively. At the end of the fifth year, it must undergo a general renovation at the cost of .$45,000. Under these conditions, what is the Uniform Equivalent Annual Cost generated by the company's acquisition of the machine? Consider an attractive minimum rate of return of 10% per year.A contractor has purchased a wheel loader for $115,000 and plans to use it for 2,000 hours per day. The cost of one set of tires is $25,000. At this usage rate, the contractor anticipates disposing of the loader after using it for 10 years and realizing a salvage value of $35,000. The flywheel horsepower rating of the loader's diesel engine is 105 horsepower. The interest rate is 10%. The loader operator will earn $34.00 per hour including fringe benefits, and diesel fuel costs $1.20 per gallon. How much is the contractor's hourly ownership cost for the loader if using time value money analysis?
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- 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.Suppose the reader has an old car, which is a gas guzzler. It is 10 years old and could sell for $400 cash to a local dealer. Assume that your MV in two years is zero. For the foreseeable future, annual maintenance expenses will average $800, and the car will get only 10 miles per gallon. Gasoline costs $1.50 per gallon, and the car is used an average of 15,000 miles per year. You now have the opportunity to replace your old car with a better one that costs $8,000. If I bought it, I would pay cash. Maintenance costs are expected to be negligible since it has a two-year warranty. This car averages 30 miles per gallon. Use the IRR method to determine which alternative should be selected. Use a two-year analysis period and assume that the new vehicle can sell for $5,000 at the end of year two. The MARR is 15% per year. Mention any other assumptions you make.A food processing plant consumed 450,000 kW of electric energy annually and pays an average of P2.00 per kWh. A study is being made to generate its own power to supply the plant the energy required, and that the power plant installed would cost P2,000,000. Annual operation and maintenance, P800,000. Other expenses P100,000 per year. Life of power plant is 15 years; salvage value at the end of life is P200,000; annual taxes and insurances, 4% of first cost; and rate of interest is 14%. What is the rate of return? Is the power plant justifiable?