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 3P
To determine
Calculate the Annual worth.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
A company is considering replacing a machine (defender) that was bought
six years ago for $50,000 and has now malfunctioned. The machine can be repaired to
extend its life by five more years. If repaired, the machine will require an operating cost
of $10,000 per year. If it is replaced, the new machine (challenger) will cost $44,000, will
last for six years, and will have operating expenses of $5,000 per year. The challenger
will have zero salvage value at the end of its six year life. The malfunctioned defender
can be sold at a current market value of $15,000. If MARR is 12% per year, what is
the maximum amount that the company should spend to repair the existing machine
instead of switching to the challenger? Use the outsider viewpoint method. (Note: All
values are before taxes, no tax calculations are necessary).
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…
An engineer calculated the AW values shown for retaining a presently owned
machine additional years.
A challenger has an ESL of 4 years with AW = $-60,000 per year.
Assuming all future costs remain the same, when should the company replace the
defender?
The MARR is 12% per year. Assume used machines like the one presently owned
will always be available.
AW of Defender,
2$
|-77,000
|-63,000
|-58,000
-64,000
-70,000
Years Retained
1
2
3
4
O a) at year 5
O b) at year 4
c) at year 1
d) at year 3
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
- Huntington Medical Center purchased a used low-field MRI scanner 2 years ago for $445,000. Its operating cost is $400,000 per year and it can be sold for $140,000 anytime in the next 3 years. The Center’s director is considering replacing the presently owned MRI scanner with a state-of-the-art 3 Tesla machine that will cost $2.5 million.The operating cost of the new machine will be $280,000 per year, but it will generate extra revenue that is expected to amount to $700,000 per year. The new unit can probably be sold for $750,000 3 years from now. You have been asked to determine how much the presently owned scanner would have to be worth on the open market for the AW values of the two machines to be the same over a 3-year planning period. The Center’s MARR is 10% per year. The presently owned scanner should be worth $ on the open market. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up…arrow_forwardHuntington Medical Center purchased a used low-field MRI scanner 2 years ago for $445,000. Its operating cost is $225,000 per year and it can be sold for $125,000 anytime in the next 3 years. The Center's director is considering replacing the presently owned MRI scanner with a state-of-the-art 3 Tesla machine that will cost $2 million.The operating cost of the new machine will be $220,000 per year, but it will generate extra revenue that is expected to amount to $425,000 per year. The new unit can probably be sold for $725,000 3 years from now. You have been asked to determine how much the presently owned scanner would have to be worth on the open market for the AW values of the two machines to be the same over a 3-year planning period. The Center's MARR is 9% per year. The presently owned scanner should be worth $ on the open market.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_forward
- A large city in mid-west needs to buy a street-cleaning machine. A used vehicle will cost $75000 and has a market value of $20000 after its five-year life. A new system cost $150000 and has a market value of $40000 after five-years. The new system has some features that reduce labor hours compared with used system. the used system requires labor hours of 8 hours per day and 20 days per month. the labor costs are $50 per hour. the MARR is 12%. if the new system is expected to be able to reduce labor hours by 20% compared with the used system, which system should the city purchase? and how many hours must the system be operated at the break even?arrow_forwardAn engineer calculated the AW values shown for retaining a presently owned machine additional years. A challenger has an ESL of 4 years with AW = $-60,000 per year. Assuming all future costs remain the same, when should the company replace the defender? The MARR is 12% per year. Assume used machines like the one presently owned will always be available. AW of Defender, 24 -77,000 -63,000 Years Retained 1 12 -58,000 -64,000 -70,000 13 4 a) at year 5 b) at vear 2 always be available. AW of Defender, 2$ |-77,000 -63,000 -58,000 -64,000 -70,000 Years Retained 3 4 15 O a) at year 5 b) at year 2 c) at year 1 d) at year 4 e) at year 3arrow_forwardA manufacturer has been ordered to stop discharging acidic waste into the city sewer. Your analysis shows that the company should choose one of the following systems: System Installed Cost H J $25,000 Your Answer: $35,000 Annual O&M Cost $1,000 in the first year, but grows by 10% each year $500 in the first year, but grows each year by $100 Salvage Value $2,000 $5,000 If the life span of each project is 20 years and interest is assumed to be Y%, which system should be purchased? 4arrow_forward
- An appliance manufacturing company intends to produce three models of electric fans. These models are the Stand Fan, Wall Fan, and Ceiling Fan. The table below shows the available information on these three models. Stand Fan P 750.00 P 300.00 How many units of each model should be sold each month to breakeven? Type of Cost Selling Price/Unit Variable Cost/Unit Wall Fan P 500.00 P 250.00 Ceiling Fan P 1,000.00 P 500.00 What are the breakeven sales each month?arrow_forwardCompany X is looking to expand their operations to add a second product line capable of producing 1.25 Million units per year. The total estimated investment cost for the new line is $25 Million, with a salvage value equal to 20% of the purchase price at the end of the 6-year project life. The annual expected sales volume is shown below, in thousands of units: Year 1 2 3 4 5 6Volume 525,000 600,000 725,000 800,000 925,000 1,000,000 The average selling price is fixed for the project life at $125 per unit. Variable costs (per unit) include $35 for materials, $20 for manufacturing, and $18 for labor. There are additional fixed operating and maintenance costs totaling $14.25 Million per year. The company’s working capital calculations are based on a 2.5-month supply of raw materials and 1.5 months of combined inventory (WIP and finished goods) that it maintains to balance overall industry demand. FX…arrow_forwardA factory manager bought a rare machine for $10 million. of the machine The sales value at the end of the first year will be $3 million and the machine will be sold by antique dealers. It is estimated to be valued at $500,000 due to the Initial cost of maintenance Expected to be $300,000 in 3 years and double each year thereafter. In this way, the maintenance cost of the 4th year is $600,000, the maintenance cost of the 5th year is $1,200,000, etc. will be. Calculate the economic life of this machine based on the Minimum Attractive Efficiency Ratio of 15%.arrow_forward
- The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $−95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $-90,000 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, Years AW Value, $ per Year 1 -89,000 2 -95,000 3 -86,000 4 -85,000 5 -95,000 a) The ESL of the defender is ____year(s) with the lowest AW of $_____. b) The (Click to select defender challenger) has the lower AW at $______for n equal to ____ .arrow_forwardThe AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $−95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $-83,000 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, Years AW Value, $ per Year 1 -92,000 2 -94,000 3 -80,000 4 -99,000 5 -95,000 a) The ESL of the defender is year(s) with the lowest AW of $ . b) The (Click to select) challenger defender has the lower AW at $ for n equal to .arrow_forwardA company with a MARR of 10% must install one of two production machines. The economic parameters of each machine are as follows: Machine X Y Initial cost ($) $15,000 $22,000 Service life (years) 4 years 6 years Salvage value end of life ($) $2,000 $1,000 The Future worth (FW) for the machine Y over the 12 years analysis period is: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