Engineering Economy, Student Value Edition (17th Edition)
Engineering Economy, Student Value Edition (17th Edition)
17th Edition
ISBN: 9780134838137
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Chapter 9, Problem 5P
To determine

Calculate the equivalent annual value.

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A 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?
Assume the MARR is 10% per year for this analysis. A presently owned machine that was purchased 8 years ago for $450,000 is under consideration for replacement. It has an annual operating cost of $120,000 per year and a salvage value of $40,000 whenever it is replaced. The challenger has a first cost of $670,000, an expected annual operating cost of $94,000, and a salvage value of $60,000 after its 10-year economic life. The breakeven market value of the presently owned machine required to make the AW values of the two machines the same, if the presently owned machine is kept for 5 more years and then replaced with the challenger that has the same AW, is closest to: (a) $196,340 (b) $255,390 (c) $325,360 (d ) $394,770
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. Years Retained 12345 a) at year 5 b) at year 4 c) at year 1 d) at year 3 AW of Defender, $ -77,000 -63,000 -58,000 -64,000 -70,000
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