Contemporary Engineering Economics (6th Edition)
Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 5, Problem 2ST
To determine

Calculate the present worth.

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A 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 radiology clinic is considering buying a new $700,000 x-ray machine, which will have no salvage value after installation because the cost of removal will be approximately equal to its sales value. Maintenance is estimated at $24,000 per year as long as the machine is owned. After 10 years the x-ray source will be depleted and the machine must be scrapped. Which of the following represents the most economic life of this x-ray machine? Solve a.One year, because it will have no salvage after installation b. Five years, because the maintenance costs are constant c. Ten years, because maintenance costs don't increase d. Cannot be determined from the information given.
Advanced Electrical Insulator Company is considering replacing a brokeninspection machine, which has been used to test the mechanical strength of electrical insulators with a newer and more efficient one. If repaired, the old machine can be used for another five years although the firm does not expect to realize any salvage value from scrapping it in five years. Alternatively, the firm can sell the machine to another firm in the industry now for $5,000. If the machine is kept, it will require an immediate $1,200 overhaul to restore it to operable condition. The overhaul will neither extend the service life originally estimated nor increase the value of the inspection machine. The operating costs are estimated at $2,000 during the first year and are expected to increase by $1,500 per year thereafter. Future market values are expected to decline by $1,000 per year. The new machine costs $10,000 and will have operating costs of $2,000 in the first year, increasing by $800 per year…
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