Engineering Economy (16th Edition) - Standalone book
16th Edition
ISBN: 9780133439274
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 21P
To determine
Calculate the incremental ATCF.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company.
Price Co. is considering replacing an existing piece of equipment. The project involves the following:
•
The new equipment will have a cost of $2,400,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t = 0.
•
The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year).
•
The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000.
•
Replacing the old machine will require an investment in net operating working capital (NOWC) of…
Solve correctly in excel
Six years ago, a company purchased $30,000 of equipment. The equipment has just been sold for $5000. The equipment was depreciated using 50% bonus depreciation / 50% MACRS (using a 5-year recovery period). The actual savings due to the purchase of the equipment is shown below. The firm's MARR is 12% and it's tax rate is 25%. What is the after-tax present worth of the investment?
Year
1
2
3
4
5
6
Savings
5000
6000
7000
7000
4000
3000
Hyundai USA has numerous robotic welders as well as robotic checkers with vision. One underbody robotic welder costing $1,200,000 (7-year property class) was installed and is increasing productivity by 2.5% in one area. The result is a savings of $500,000 per year. Deductible expenses other than depreciation and interest associated with the installed robotic welder are only $120,000. Hyundai borrowed $550,000 at 11% for 5 years. They plan to keep the welder for 8 years. Hyundai’s income-tax rate is 25% and their MARR is 9% after taxes. Determine the PW, FW, AW, IRR, and ERR for the investment if:
The loan is paid back using Plan 3. Only calculate PW and
IRR
Chapter 9 Solutions
Engineering Economy (16th Edition) - Standalone book
Ch. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - A city water and waste-water department has a...Ch. 9 - Prob. 9PCh. 9 - Prob. 10P
Ch. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - Use the PW method to select the better of the...Ch. 9 - Prob. 14PCh. 9 - Prob. 15PCh. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 21PCh. 9 - Prob. 22PCh. 9 - Prob. 23PCh. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Prob. 26PCh. 9 - Prob. 27SECh. 9 - Prob. 28SECh. 9 - Prob. 29CSCh. 9 - Prob. 30CSCh. 9 - Prob. 31CSCh. 9 - Prob. 32FECh. 9 - Prob. 33FECh. 9 - Prob. 34FECh. 9 - Prob. 35FECh. 9 - Prob. 36FE
Knowledge Booster
Similar questions
- Blue Origin Engine Factory purchased a new vertical turning lathe in 2023 at a cost of $190,000. They also paid an additional $25,000 to have the equipment delivered and installed, and the personnel trained. This new equipment has a 10-year service life. The finance department decided to depreciate this asset using MACRS over its seven-year class life. a. Calculate the cost basis of this equipment (e.g. Cost Basis = $xyz +$abc +...) b. Calculate the depreciation expenses for each year by tabulating your answer and showing your calculations.arrow_forwardHyundai USA has numerous robotic welders as well as robotic checkers with vision. One underbody robotic welder costing $1,200,000 (7-year property class) was installed and is increasing productivity by 2.5% in one area. The result is a savings of $500,000 per year. Deductible expenses other than depreciation and interest associated with the installed robotic welder are only $120,000. Hyundai borrowed $550,000 at 11% for 5 years. They plan to keep the welder for 8 years. Hyundai’s income-tax rate is 25% and their MARR is 9% after taxes. Determine the PW, IRR, for the investment if: The loan is paid back using Plan 3 Plan 3—make equal principal-plus-interest end-of-period payments.arrow_forwardA builder paid $120,000 for a house and lot. The value of the land was appraised at $65,000, and the value of the house at $55,000. The house was then torn down at an additional cost of $8,000 so that a warehouse could be built on the lot at a cost of $50,000. What is the total value of the property with the warehouse? For depreciation purposes, what is the cost basis for the warehouse?arrow_forward
- If an asset has a cost of 6,000, a salvage value of 1,500, and the annual straight line method depreciation expense is 1,125, what is the useful life of the asset?arrow_forwardWhat is the book value of electronic test equipment after 8 years of use if it depreciates from its original value of P 120,000.00 to its salvage value of 13% in 12 years? Use straight-line method.arrow_forwardA miniature building company named Tiny Touches purchased a 3D printer which costs $250,000. It is expected to last for 15 years and at the end of its useful life, it will cost $25,005 Find the annual depreciation if it’s depreciation using sinking fund method at 7%arrow_forward
- An engineering firm from purchased, 12 years ago, a heavy planner for P50,000 with no salvage value. As the life of the planner was 20 years, a straight line depreciation reserve has been provided on that basis. Now the firm wishes to replace the old planner with a new one possessing several advantages. It can sell the old planner for P10,000. The new one will cost P100,000. How much new capital will be required to make the purchase? - a. P60,000 - b. P55,000 • c. P66,000 - d. P57.000arrow_forwardParagon Properties built a shopping center at a cost of $50M in year 2010. The company started leasing space in July of 2014. The land was purchased for $5M. Determine the depreciation charges through 2017 if the property was sold in November 2017. $4,615,200 $5,002,200 $3,563,100 $3,991,050arrow_forwardSword Properties in Knoxville, TN built a shopping center at a cost $50M in year 2010. The company started leasing space in July of 2010. Assuming the land was purchased for $5M; determine the depreciation charges through 2013 if the property was sold in November 2013.arrow_forward
- A piece of machinery at a maunfacturing plant has a cost basis of $44,000, and a salvage value of $13,000 after producing 32,000 units. Using units-of-production depreciation, what is the allowed depreciation charge per unit. Express your answer in $ to the nearest $0.01.arrow_forwardKappa Holdings is looking at a new system with an installed cost of $740,000. This cost will be depreciated straight-line to zero over the project's 7-year life, at the end of which the system can be salvaged for $102,000. The system will save the firm $217,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $69,000, which will be returned at the end of the project. If the tax rate is 22 percent and the discount rate is 9 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPVarrow_forwardQuestion 2: A new bottle-capping machine costs $45 000, including $5 000 for installation. Operating and maintenance costs are expected to be $3 000 for the first year, increasing by $ 1 000 each year thereafter. The salvage value is calculated by straight-line depreciation where a value of 0 is assumed at the end of the service life. a) Construct a spreadsheet that computes the equivalent annual cost (EAC) for the bottle capper. What is the economic life if the expected service life is 6, 7, 8, 9 or 10 years? Interest is 12%./ b) How sensitive is the economic life to the different length of service life? Construct a sensitivity graph to illustrate this point.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning