EBK BASICS OF ENGINEERING ECONOMY
2nd Edition
ISBN: 8220102797123
Author: Blank
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 34APQ
To determine
Capital recovery.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A company is considering two types of equipment for its manufacturing plant. The data were as follows: For Type A, the first cost is $300,000; the annual operating cost is $40,000; the annual labor cost is $60,000 while for Type B, the first cost is $400,000; the annual operating cost is $32,000; the annual labor cost is $42,000. For both types, the same Insurance and Property Taxes at 3% and same also on Payroll Taxes at 4% each. The estimated life for both types is 10 years. If the minimum required rate of return is 15%, which equipment should be selected. Use the rate of return on additional investment.
Note: Show full solution and draw the line diagram. Use the proper given in the question
Topic: Comparing Alternatives (Economics)
A fixed capital investment of 12 Million pesos is required for a production plant and an estimated working capital of 3 Million pesos. Annual depreciation is estimated to be 15% of the capital investment. Determine the rate of return on the total investment and the length of time to recover it if the annual profit is 2.8 Million pesos.
Show Complete Solution on a clear paper.
. A manager has been presented with two proposals for automating a production process. Proposal A involves an initial cost of $15,000 and an annual operating costof $2,000 per year for the next 4 years. Thereafter, the operating cost is expected to increase by $100 per year. This equipment is expected to have a 10-year life with no salvage value.Proposal B requires an initial investment of $28,000 and an annual operating cost of $1,200 per year for the first 3 years. Thereafter, theoperating cost is expected to increase by $120 per year. This equipment is expected to last for 20 years and will have a $2,000 salvage value. If the company's minimum attractive rate of return is 10%, which proposal should be accepted on the basis of present worth analysis?
Chapter 5 Solutions
EBK BASICS OF ENGINEERING ECONOMY
Ch. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10P
Ch. 5 - Two machines with the following cost estimates are...Ch. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Estimates have been presented to Holly Farms,...Ch. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - A major repair on the suspension system of Janes...Ch. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32APQCh. 5 - Prob. 33APQCh. 5 - Prob. 34APQCh. 5 - Prob. 35APQCh. 5 - Prob. 36APQCh. 5 - The AW values of three revenue alternatives are ...Ch. 5 - Prob. 38APQCh. 5 - Prob. 39APQCh. 5 - Use an interest rate of 10% per year. The...Ch. 5 - Prob. 41APQCh. 5 - Prob. 42APQ
Knowledge Booster
Similar questions
- Another answer. A fixed capital investment of 12,000,000 pesos is required for a production plant and an estimated working capital of 3,000,000 pesos. Annual depreciation is estimated to be 15% of the capital investment. Determine the rate of return on the total investment and the length of time to recover it if the annual profit is 2,800,000 pesos. Show Complete solution on a clear paper.arrow_forwardWhat are the Flaws in Project Ranking by IRR?arrow_forwardThe engineer of a medium scale industry was instructed to prepare at least two plans which is to be considered by management for the improvement of their operations. plan "a" calls for an initial investment of P200,000 now with a prospective salvage value of 20% of the first cost 20 years hence. the operation and maintenance disbursement are estimated to be P15,000 a year and taxes will be 2% of first cost. Plan b calls for an immediate investment of P140,000 and a second investment of 160,000 eight years later. the operation and maintenance disbursements will be P9,000 a year for initial installation and P8,000 a year for the second installation. At the end of 20 years the salvage value shall be 20% of the investments. Taxes will be 2% of the first cost. If money is worth 12%, which plan would you recommend? Answer Plan A (anual cost =19,000, PW=337,711) Plan B (Anual cost=11,800, PW=314,564) All I need is a solution in this problem. Our subject is engineering economics and…arrow_forward
- The engineer of a medium scale industry was instructed to prepare at least two plans which is to be considered by management for the improvement of their operations. Plan “A” calls for an initial investment of P200,000 now with a prospective salvage value of 20% of the first cost 20 years hence. The operation and maintenance disbursements are estimated to be P15,000 a year and taxes will be 2% of first cost. Plan “B” calls for an immediate investment of P140,000 and a second investment of P160,000 eight years later. The operation and maintenance disbursements will be P9,000 a year for the initial installation, and P8,000 a year for the second installation. At the end of 20 years the salvage value shall be 20% of the investments. Taxes will be 2% of the first cost. If money worth 12%, which plan would you recommend? (a) Use the present worth cost method (PWC) (b) Use the equivalent uniform annual cost method (EUAC)arrow_forwardA small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the “shell” will cost $140,000 and is expected to have a $45,000 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $14,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $10,000 per year. If the company’s MARR is 12% per year, should the clamshell be purchased or leased on the basis of a future worth analysis? Assume the annual M&O cost is the same for both options. The future worth when purchased is $ . The future worth when leased is $ .arrow_forwardThe engineer of a medium scale industry was instructed to prepare at least two plans which is to be considered by the management for the improvement of their operations. Money is worth 10.118% annually. PLAN A: Plan A calls for an initial investment of P354,571 and will have a salvage value equivalent to 18.876% of the invested capital at the end of 19 years. The plan requires payments of P14,026 and P18,874 for years 5 and 9, respectively. The operation and maintenance disbursement are estimated to be P11,847 annually and annual taxes will be 2% of the initial investment. PLAN B: Plan B calls for an immediate investment of P216.985, a second investment of P268,775 on the 8th year, and a final investment of P130.145 on the 12th year. Plan B will last for 19 years as well. The operation and maintenance disbursements will be P15,214 annually. Using the Equivalent Uniform Annual Cost Analysis, determine the following: A.)Equivalent annual cost of Plan A. B.)Equivalent annual cost of…arrow_forward
- An automaton asset with a high first cost of $10 million has required capital recovery (CR) of $1,985,000 per year. The correct interpretation of this CR value is that: (a) the owner must pay an additional $1,985,000 each year to retain the asset. (b) each year of its expected life, a net revenue of $1,985,000 must be realized to recover the $10 million first cost and the required rate of return on this investment. (c) each year of its expected life, a net revenue of $1,985,000 must be realized to recover the $10 million first cost. (d) the services provided by the asset will stop if less than $1,985,000 in net revenue is reported in any year.arrow_forwardAn investment of RM50,000 can be made in a project that will produce a uniform annual revenue of RM3,170 for seven years and then have a market (salvage) value of RM8,100. Expenses will be RM1,100 in second year and saving RM2,100 in third year. Second investment of RM4, 000 in fifth years was made to increase the project operation. The company is willing to accept any project that will earn 10% per year or more before incomes taxes, on all invested capital. Show whether this is desirable investment by using the Present Worth method. Draw the cashflow diagram.arrow_forwardQuestion 7 Cash flows occurring at different times, have to be accounted for by equivalence, using a specific interest rate at a specific number of periods. True or False. Question 8 - The breakeven volume is the quantity for which the unit cost is minimized. . True or False. Question 9 - Sunk costs must be ignored in engineering economics, as they represent money already spent, and therefore, have no consequence in decision the making process. True or Falsearrow_forward
- Ellis Equipment sold a used Massey Ferguson tractor for $55,000 to a South Kansas farmer 10 years ago. (a) What is the uniform net cash flow that the farmer had to receive each year to realize payback and a return of 5% per year on his investment over a period of 3 years? 5 years? 8 years? All 10 years? (b) If the net cash flow was actually $6000 per year, what is the amount the farmer should have paid for the tractor to realize payback plus the 5% per year return over these 10 years?arrow_forwardA plant operation has fixed costs of'$ | 50,000 per year and variable costs of $50 per unit. When the plant produces the maximum capacity, which is 7000 unit per year, the profit equals $1,800,000. What is the breakeven point (in units) of this plant? (Assume that the unit selling price is constantarrow_forwardA cell phone company has a fixed cost of $1,000,000 per month and a variable cost of $22 per month per subscriber. The company charges $33 per month to its cell phone customers. a.What is the annual breakeven point for this company? b. The company currently has 95,000 subscribers and proposes to raise its monthly fees to $39.95, what is the new annual break-even point if the variable cost increases to $25 per customer per month? c.lf 20,000 subscribers will drop their services because of mönthly increase in part (b), will the company still be profitable?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education