EBK ENGINEERING ECONOMY
17th Edition
ISBN: 9780134838229
Author: Sullivan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 46P
To determine
Select the alternative based on the ATCF.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Veritas Inc. has decided to acquire a new Hydraulic Excavator. It has three options.
Caterpillar: purchase cost of $354,055 and operating costs of $28,121 per year (paid at the end of
each year).
John Deere: purchase cost of $288,413 and operating costs of $21,091 per year (paid at the end of
each year).
Volvo: purchase cost of $323,238 and operating costs of $15,484 per year (paid at the end of each
year).
Assume that Geek Inc. has a budget of $335,269 and all excavators have a service life of 13 years.
Based on the defender-challenger approach and given that the MARR is 10%, compute the
incremental Benefit-Cost ratio of choosing the best excavator (note: round your answer to two
decimal places; do not include spaces, dollar signs, or commas). Indicate your recommendation as
follows:
- answer "0" (without the commas) if your recommendation is the Caterpillar;
- answer "1" (without the commas) if your recommendation is the John Deere;
- write down as your answer the value of the…
Machine “A” has a starting cost of $ 50,000 with an estimated period of 12 years and a salvage value of $ 14,000. Annual O&M costs are $ 6,000 the first year, $ 6,300 the second year, and so on. Another Alternative is machine “B” which has an initial cost of $ 30,000 and a recovery value of $ 3,000 at the end of the 12-year service period, the annual operating and maintenance expenses are $ 8,000 the first year, from $ 8,500 the second year and so on. Using an interest rate of 13% per year. Do a Present Value analysis, and determine the value of machine A
A steam boiler is required as part of the design of a new plant. The types of fuel that can be used to ignite the boiler are natural gas, fuel oil, and coal. The cost of installation including all required controls is $40,000 for natural gas, $50,000 for fuel oil, and $120,000 for coal. In addition, the annual cost of fuel oil is $8,000 less than the annual cost of natural gas and $12,000 more than the annual cost of coal. The boiler is to be utilized for 20 years and interest rate is 8%. Using the most suitable approach, determine the best alternative. Is there any other consideration for the obtained result?
As one way, please solve using either Cash Flow Analysis, Present Worth Analysis, or any other similar method.
As a second way, use Excel software and include all required command statements require to solve it.
Chapter 7 Solutions
EBK ENGINEERING ECONOMY
Ch. 7 - How are depreciation deductions different from...Ch. 7 - Prob. 2PCh. 7 - Explain the difference between real and personal...Ch. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10P
Ch. 7 - Prob. 11PCh. 7 - Prob. 12PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - A manufacturer of aerospace products purchased...Ch. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Prob. 19PCh. 7 - Prob. 20PCh. 7 - Prob. 21PCh. 7 - Prob. 22PCh. 7 - Prob. 23PCh. 7 - Prob. 24PCh. 7 - Prob. 25PCh. 7 - Prob. 26PCh. 7 - Prob. 27PCh. 7 - Prob. 28PCh. 7 - Prob. 29PCh. 7 - Prob. 30PCh. 7 - Prob. 31PCh. 7 - Prob. 32PCh. 7 - Prob. 33PCh. 7 - Refer to Problem 6-79. The alternatives all have a...Ch. 7 - Prob. 35PCh. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Prob. 39PCh. 7 - Prob. 40PCh. 7 - Prob. 41PCh. 7 - Prob. 42PCh. 7 - Prob. 43PCh. 7 - Prob. 44PCh. 7 - Prob. 45PCh. 7 - Prob. 46PCh. 7 - AMT, Inc., is considering the purchase of a...Ch. 7 - Prob. 48PCh. 7 - Prob. 49PCh. 7 - Prob. 50PCh. 7 - Prob. 51PCh. 7 - Prob. 52PCh. 7 - Determine the after-tax yield (i.e., IRR on the...Ch. 7 - A 529-state-approved Individual Retirement Account...Ch. 7 - Prob. 55PCh. 7 - Prob. 56PCh. 7 - Prob. 57SECh. 7 - Prob. 58SECh. 7 - Prob. 59SECh. 7 - Refer to the chapter opener and Example 7-14. As...Ch. 7 - Prob. 61FECh. 7 - The Parkview Hospital is considering the purchase...Ch. 7 - Prob. 63FECh. 7 - Prob. 64FECh. 7 - Prob. 65FECh. 7 - Prob. 66FECh. 7 - Prob. 67FECh. 7 - Prob. 68FECh. 7 - Prob. 69FECh. 7 - Prob. 70FECh. 7 - Prob. 71FECh. 7 - Prob. 72FECh. 7 - Prob. 73FECh. 7 - Prob. 74FECh. 7 - Prob. 75FECh. 7 - If the federal income tax rate is 35% and the...Ch. 7 - Prob. 77FECh. 7 - Acme Manufacturing makes their preliminary...Ch. 7 - Prob. 79FECh. 7 - Prob. 80FECh. 7 - Prob. 81FECh. 7 - Prob. 82FECh. 7 - Prob. 83FECh. 7 - Prob. 84FECh. 7 - Two insulation thickness alternatives have been...
Knowledge Booster
Similar questions
- Avocado has received a special order for 2,400 units of its product at a special price. The product normally sells for $440 and has the following manufacturing costs: Per unit Direct materials $128 Direct labor 83 Variable manufacturing overhead 68 Fixed manufacturing overhead 120 Unit cost $399 Assume that Avocado has sufficient capacity to fill the order. What special order price should Avocado charge to make a $12,000 incremental profit?arrow_forwardMachine J has a first cost of $50,000, an estimated service period of 12 years, and an estimated salvage value of $14,000 at the end of the 12 years. Estimated annual disbursements for operations and maintenance are $6,000 for the first year, $6,300 for the second year, and will increase $300 each year thereafter. An alternate is Machine K, which has a first cost of $30,000 and an estimated zero salvage value at the end of the 12- year service period. Estimated annual disbursements for operation and maintenance are $8,000 for the first year, $8,500 the second year, and will increase $500 each year thereafter. Estimated extra income taxes with Machine J are $750 the first year, $850 the second, and will increase $100 each year thereafter. Using an after-tax i* of 12% compare the equivalent uniform annual cost of a 12-year service from Machines J and K.arrow_forwardDigital Tech Dynamics purchased a new quality inspection system for $550,000. The estimated salvage value was $50,000 after 10 years. Currently, the expected remaining life is 7 years with an AOC of $67,500 per year and an estimated salvage value of $40,000. The new president has recommended early replacement of the system with one that costs $430,000 and has a 12-year economic service life, a $35,000 salvage value, and an estimated AOC of $50,000 per year. If the MARR for the corporation is 12% per year, use factor-based relations to determine the minimum trade-in value necessary now to make the president's replacement economically advantageous. The minimum trade-in value necessary now to make the president's replacement economically advantageous is $[arrow_forward
- To improve package tracking at a UPS transfer facility, conveyor equipment was upgraded with RFID sensors at a cost of $345,000. The operating cost is expected to be $148,000 per year for the first 3 years and $210,000 for the next 3 years. The salvage value of the equipment is expected to be $140,000 for the first 3 years, but due to obsolescence, it won’t have a significant value after that. The interest rate is 10% per year. Determine the ESL and equivalent AW using tabulated factors.arrow_forwardA building supplies distributor purchased a gasoline-powered forklift truck 4 years ago for $8,000. At that time, the estimated useful life was 8 years with a salvage value of $800 at the end of this time. The truck can now be sold for $2,500. For this truck, average annual O&M expenses for year j have been Cj = $2, 000 + $400(j − 1) Now the distributor is considering the purchase of a smaller battery-powered truck for $6,500. The estimated life is 10 years, with the salvage value decreasing by $600 each year. Average annual O&M expenses are expected to be $1,200. If a MARR of 10% is assumed and a 4-year planning horizon is adopted, based on an annual worth cash flow approach should the replacement be made now?arrow_forwardA company is analyzing a make-versus-purchase situation for a component used in several products, and the engineering department has developed these data: Option A: Option B: Purchase 10,000 items per year at a fixed price of $8.88 per item. The cost of placing the order is negligible according to the present cost accounting procedure. Manufacture 10,000 items per year, using available capacity in the factory. Cost estimates are direct materials = $4.96 per item and direct labor = $1.31 per item. Manufacturing overhead is allocated at 200% of direct labor (= $2.62 per item). Based on these data, should the item be purchased or manufactured? The total cost of Option A is $ (Round to the nearest dollar.) The total cost of Option B is $ . (Round to the nearest dollar.) Should the item be purchased or manufactured? Choose the correct answer below. O The item should be manufactured. O The item should be purchased.arrow_forward
- A construction company had a number of projects and needed to a construction equipment to be used for five years. The company had two choices: the first one included buying the equipment with a price of $50,000; the operation and repair cost is $2,000 a year, and the salvage value is $10,000 at the end of the fifth year. The second option comprised renting the required equipment with amount of $8,000 a year, which is usually paid at the begging of each year and needs $3,000 a year for operation and repair. Specify which option is better for the company? The interest rate is 6%.arrow_forwardYou are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $300 per unit and sales volume to be 1,000 units in year 1, 1,250 units in year 2, and 1,325 units in year 3. The project has a three-year life. Variable costs amount to $200 per unit and fixed costs are $50,000 per year. The project requires an initial investment of $150,000 in assets that will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $25,000. NWC requirements at the beginning of each year will be approximately 10 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 10 percent. What will the free cash flow for this project be in year 2? Multiple Choice $53,000 $102,450 $107,250 $49,950arrow_forwardOperating and repair costs for equipment will be $15,000 per year for a 3-year warranty period, which required an initial investment of $300,000. Beginning in year 4, costs will climb at a rate of $2,500 per year. The equipment will bring $55,000 in income to the business, but starting after year 2. The equipment will be retired after year 10, with a salvage value of $30,000. Find the present worth of these costs if the firm’s interest rate is 12%. What is the annual cost of ownership?arrow_forward
- White Oaks Properties builds strip shopping centers and small malls. The company plans to replace its refrigeration, cooking, and HVAC equipment with newer models in one entire center built 10 years ago. 10 years ago, the original purchase price of the equipment was $750,000 and the operating cost has averaged $270,000 per year. Determine the equivalent annual cost of the equipment if the company can now sell it for $204,000. The company's MARR is 19% per year. The equivalent annual cost of the equipment is determined to be $arrow_forwardA company is evaluating two alternatives to produce a new product. The initial cost of Alt Alpha is $-160,000, with an annual maintenance and operations cost of $-40,000, and final salvage value at the end of year 2 of $10,000. The initial cost of Alt Timore is $-500,000, with an annual maintenance and operations cost of $-10,000, and final salvage value at the end of year 4 of $33,000. Assume a MARR of 19% per year. Calculate the present worth of each alternative. The present worth for Alt Alpha is $ The present worth for Alt Timore is $ Selectarrow_forwardFor P500, 000, an engineer purchased a piece of equipment. He added another P40,000 to his budget for installation and other costs. The equipment's expected useful life is ten years. The salvage value is x% of the original cost. The book value at the end of five years using the straight line technique will be P300,500. What is the numerical value of x?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