ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 68P
To determine
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Concurris Prototyping is committed to using the newest and finest equipment in its labs. Accordingly, Wilma, a senior engineer, has recommended that a 2-year-old piece of precision measurement equipment be replaced immediately. She believes it can be demonstrated that the proposed equipment is economically advantageous at a 15%-per year return and a planning horizon of 5 years. Perform the replacement analysis using the annual worth method, a 5-year study period, and the estimates below. Was Wilma correct?
Equipment
Current
Proposed
Original purchase price, $
−30,000
−36,000
Current market value, $
15,000
--
Remaining life, years
5
15
Estimated value in 5 years, $
7,000
10,000
Salvage value after 15 years, $
--
5,000
AOC, $ per year
−7,000
−3,000
The AW of the defender is $− and the AW of the challenger is $− .
Wilma (Click to select) is is not correct.
oncurris Prototyping is committed to using the newest and finest equipment in its labs. Accordingly, Wilma, a senior engineer, has recommended that a 2 -year-old piece of precision measurement equipment be replaced immediately. She believes it can be demonstrated that the proposed equipment is economically advantageous at a 15%-per year return and a planning horizon of 5 years. Perform the replacement analysis using the annual worth method, a 5 -year study period, and the estimates below. Was Wilma correct? \table[[Equipment,Current,Proposed],[Original purchase price, $,-30,000,-42,000
An equipment costing $57,500 is being considered for a production process at Dewey Chemicals. The expected benefits per year is $4,500 and estimated salvage value is $10,000. Determine the rate of return the company can get in this equipment proposal. Equipment life = 15 years.
Chapter 7 Solutions
ENGR.ECONOMIC ANALYSIS
Ch. 7 - Prob. 1QTCCh. 7 - Prob. 2QTCCh. 7 - Prob. 3QTCCh. 7 - Prob. 4QTCCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6P
Ch. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10PCh. 7 - Prob. 11PCh. 7 - Prob. 12PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - Prob. 15PCh. 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. 27PCh. 7 - Prob. 28PCh. 7 - Prob. 29PCh. 7 - Prob. 30PCh. 7 - Prob. 31PCh. 7 - Prob. 32PCh. 7 - Prob. 33PCh. 7 - Prob. 34PCh. 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 - Prob. 47PCh. 7 - Prob. 49PCh. 7 - Prob. 50PCh. 7 - Prob. 51PCh. 7 - Prob. 52PCh. 7 - Prob. 53PCh. 7 - Prob. 54PCh. 7 - Prob. 55PCh. 7 - Prob. 56PCh. 7 - Prob. 57PCh. 7 - Prob. 58PCh. 7 - Prob. 59PCh. 7 - Prob. 60PCh. 7 - Prob. 61PCh. 7 - Prob. 62PCh. 7 - Prob. 63PCh. 7 - Prob. 64PCh. 7 - Prob. 65PCh. 7 - Prob. 66PCh. 7 - Prob. 67PCh. 7 - Prob. 68PCh. 7 - Prob. 69PCh. 7 - Prob. 70PCh. 7 - Prob. 71PCh. 7 - Prob. 72PCh. 7 - Prob. 73PCh. 7 - Prob. 74PCh. 7 - Prob. 75PCh. 7 - Prob. 76PCh. 7 - Prob. 77PCh. 7 - Prob. 78PCh. 7 - Prob. 79PCh. 7 - Prob. 80PCh. 7 - Prob. 81PCh. 7 - Prob. 82PCh. 7 - Prob. 83PCh. 7 - Prob. 84PCh. 7 - Prob. 85PCh. 7 - Prob. 87PCh. 7 - Prob. 88PCh. 7 - Prob. 89P
Knowledge Booster
Similar questions
- A new utility service truck can be purchase for $70,043. Its expected useful life is six years, at which time its market value will the zero. Annual receipts less expenses will be approximately $28,084 per year over the six-year study period. Compute Present Worth (PW) with a MARR of 20% to determine whether this is good investment.arrow_forwardTo 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 machine be purchased for P 2,500,000. It will incur P40,000 in maintenance expenses and can start earning revenues of P125,000 per month as soon as it is installed. It can be sold at the end of its useful life of 4 years at an estimated price of P160,000. The cost of capital is 15% per annum. The reinvestment rate is 12 %. Evaluate using Present Worth, Annual Worth and Future Worth Method to determine if it is acceptable (positive value) note: present WORTH not present value thanksarrow_forward
- The Bureau of Public Highways is considering two possible types of road surfacing with cost estimates per kilometer as follows: Type A Type B First Cost P500k P650k Resurfacing period 8 years 12 years Resurfacing Cost P200k P250k Average annual maintenance cost P15k P20k The periodic resurfacing do not include the base of the subgrade. Compare these types by calculating the present worth for 24 year service, with no salvage value at the end of this time using interest rate of 10%. What is the Present Worth of Alternative B?arrow_forwardGalvanized Products is considering the purchase of a new computer system for its enterprise data management system. The vendor has quoted a purchase price of $100,000. Galvanized Products is planning to borrow one-fourth of the purchase price from a bank at 15% compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $5,000 at that time. Over the 5-year period, Galvanized Products expects to pay a technician $25,000 per year to maintain the system but will save $55,000 per year through increased efficiencies. Galvanized Products uses a MARR of 18%/year to evaluate investments. Solve, a. What is the annual worth of this investment? b. What is the decision rule for judging the attractiveness of investments based on annual worth? c. Should the new computer system be purchased?arrow_forwardA football team wants to invest in an airplane to transport the team and staff around the country. The expected life of the airplane is 20 years and its operation will cost $750,000 on an annual basis. If the manager declares that they can spend at most $4 million on a new plane, and the MARR is 6%, find the AW.arrow_forward
- Using AW analysis. Texas Popcorn Corporation is planning to fully automate it process. The company CEO is currently looking into three options. Options A costs $450,000, AOC of $55,000, and salvage value of $85,000 after 3 years. Option B will cost $720,000 with an AOC of $68,000 and salvage of $95,000 after 4 years. Option C cost $800,000 with an AOC of $95,000 and salvage of $125,000 after 6 years. Which machine should the company select at an interest rate of 10% per year? Assume the project service life is 12 years.arrow_forwardFor a new product, the marketing department predicts that sales are expected to be 100,000 units in year 1, increasing by 15,000 each subsequent year to 175,000 in year 6. There are 2 different manufacturing process available: Option A: A manufacturing machine with up-front equipment purchase cost of $150,000 and the manufacturing cost per unit is $0.70. At the end of 6 years, the equipment salvage recovery is $20,000. Option B: A machine with up-front purchase cost of $200,000 with a manufacturing cost of $0.50 per unit, and equipment salvage recovery at the end of 6 years of $40,000. Assume an interest rate of 5% and a production period of 6 years. Which option should you choose based on a present equivalent evaluation with no considerations for depreciation? 1. What is the present equivalent cost of Option A? 2. What is the present equivalent cost of Option B?arrow_forwardAn aerospace industry decides to purchase a new advanced machine.the cost of the machine are estimated to have a 4year useful life .if the MAAR Is 2096 per year . Determine which machine should be purchased on the basis of a role of return analysis. $annual operation cost 16,000,19,000 $first cost machine 31,000, 29,000arrow_forward
- A new airconditioning unit costs P150,000 and will have a salvage value of P15,000 after 5years. Electrical cost per kWh is P1.25. Calculate the annual savings in terms of electrical savings if MARR is 15% per year.arrow_forwardA small manufacturing company is considering the addition of one or more of four new product lines. If the total amount of investment capital available for new ventures is $800,000, which one(s) should the company undertake on the basis of a present worth analysis? Assume the company uses a 5-year project recovery period and a MARR of 20% per year. All cash flows are in $1000 units.arrow_forwardA bridge is to be constructed now as part of a new road. Engineers have determined that traffic density on the new road will justify a two-lane road and a bridge at the present time. Because of uncertainty regarding future use of the road, the time at which an extra two lanes will be required is currently being studied. The two-lane bridge will cost $220,000 and the four-lane bridge, if built initially, will cost $420,000. The future cost of widening a two-lane bridge to four lanes will be an extra $220,000 plus $26,000 for every year that widening is delayed. The MARR used by the highway department is 18% per year. The following estimates have been made of the times at which the four-lane bridge will be required: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