EBK CONTEMPORARY ENGINEERING ECONOMICS
EBK CONTEMPORARY ENGINEERING ECONOMICS
6th Edition
ISBN: 8220101336736
Author: Park
Publisher: PEARSON
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Chapter 5, Problem 44P
To determine

Calculate the present worth.

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Your company is considering a new computer system with an initial cost of $1 million. When implemented, the system will save $300,000 per year in inventory and administration costs. The system has a service life of five years and is classified in the three-year MACRS category. At the end of the fifth year, its residual value was estimated at $50,000. The system has no impact on net working capital. The marginal tax rate is 40 per cent. The required rate of return is 8 per cent.
You have been asked to evaluate the profitability of building a new distribution center under the following conditions:I. The proposal is for a distribution center costing $1,500,000. The facility has an expected useful life of 35 years and a net salvage value (net proceeds from its sale after tax adjustments) of $225,000.II. Annual savings (due to a better strategic location) of $227,000 are expected, annual maintenance and administrative costs will be $114,000, and annual income taxes are $43,000. Suppose that the firm's MARR is 12%. Determine the net present worth of the investment.
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.
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