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 6, Problem 42P
To determine

Calculate the net annual benefit.

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Company X has been contracting its overhauling work to Company Y for$40,000 per machine per year. Company X estimates that by building a $500,000 maintenance facility with a life of 15 years and a salvage value of $100,000 at the end of its life, it could handle its own overhauling at a cost of only $30,000 per machine per year. What is the minimum annual number of machines that Company X must operate to make it economically feasible to build its own facility, assuming an interest rate of 10%?
A tire manufacturing plant is considering purchasing $14,000 worth of new tools for use on the production line. It is estimated that the new tools will reduce required labor by $3,000 each year. The payback period for the new tools is approximately Group of answer choices 5 years 6 years 5.13 years 4.67 years
Chatham Automotive purchased new electric forklifts to move steel automobile parts two years ago. They cost ​$80,000 ​each, including the charging stand. In​ practice, it was found that they did not hold a charge as long as claimed by the​ manufacturer, so operating costs are very high. As a​ result, their current salvage value is about ​$10,000. Chatham is considering replacing them with propane models. New propane forklifts cost ​$59,000 each. After one​ year, they have a salvage value of ​$40,000​ and thereafter decline in value at a​ declining-balance depreciation rate of 20 ​percent, as does the electric model from this time on. The MARR is 7 percent. Operating costs for the electric model will be ​$18,000 this​ year, rising by 12 percent per year. Operating costs for the propane model will initially be $12,000 over the first​ year, rising by 12 percent per year. Should Chatham Automotive replace the forklifts​ now? What is the the minimum total EAC for the electric forklifts and…
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