Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 14, Problem 37P
To determine
Calculate the net cash flow.
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Atlantic Control Company purchased a machine two years ago at a cost of $70,000. At that time, the machine’s expected economic life was six years and its salvage value at the end of its life was estimated to be $10,000. It is being depreciated using the straight line method so that its book value at the end of six years is $10,000. In four years, however, the old machine will have a market value of $0. A new machine can be purchased for $80,000, including shipping and installation costs. The new machine has an economic life estimated to be four years. Three-year MACRS depreciation will be used. During its four-year life, the new machine will reduce cash operating expenses by $20,000 per year. Sales are not expected to change. But the new machine will require net working capital to be increased by $4,000. At the end of its useful life, the machine is estimated to have a market value of $2,500. What is the NPV of this project? Should Atlantic replace the old machine (assuming a…
A stamping machine is classified as seven-year MACRS property. The costbasis for the machine is $120,000, and the expected salvage value is $10,000 at the end of 12 years. Compute the book value at the end of three years for tax purposes.
An auto-part manufacturer is faced with the prospect of replacing its old robot, which has been used in stamping operation for 10 years. This particular robot was installed at a cost of $100,000 and was assumed to have a 15-year life with no appreciable salvage value. The current annual operating costs are $20,000 for this old robot, and these costs are presumed to be the same for the rest of its life. A sales representative from Advanced Robotic Systems is trying to sell this company a new-highly efficient robot. The new system would require an investment of $200,000 for installation. The economic life of this new robot is estimated to be IO years with a salvage value of $18,000, and the robot will reduce annual operating costs to $5,000. No detailed agreement has been made with the sales representative about the disposal of the old robot. Determine therange of resale values associated with the old system that would justify installation of the new system at a MARR of 14%.
Chapter 14 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 14 - Prob. 1PCh. 14 - Prob. 2PCh. 14 - Prob. 3PCh. 14 - Prob. 4PCh. 14 - Prob. 5PCh. 14 - Prob. 6PCh. 14 - Prob. 7PCh. 14 - Prob. 8PCh. 14 - Prob. 9PCh. 14 - Prob. 10P
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