1. A company is considering two alternatives with regards to anequipment which it needs. The alternatives are as follows:Alternative A: PurchaseCost of equipmentSalvage valueDaily operating costP700,000100,00050010Economic life, yearsAlternative B: Rental at P1,500 per day.At 18% interest, how many days per year must the equipment bein use if Alternative A is to be chosen.Ans. 152 days

Salvage value is the determines the resale value of an asset at the end of its useful life. It is…

1. A company is considering two alternatives with regards to an equipment which it needs. The alternatives are as follows: Alternative A: Purchase P700,000 100,000 Cost of equipment Salvage value Daily operating cost Economic life, years Alternative B: Rental at P1,500 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen. Ans. 152 days 500 10

1. A company is considering two alternatives with regards to an equipment which it needs. The alternatives are as follows: Alternative A: Purchase P700,000 100,000 Cost of equipment Salvage value Daily operating cost Economic life, years Alternative B: Rental at P1,500 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen. Ans. 152 days 500 10

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6) Data for 2 alternatives are given below. If i = 10%, determine the cost of alternative A so that the 2 altematives will be equally desirable using ВС ratio. Alternatives A B Cost X P3,200 Salvage Value 900 600 Annual Benefit 1150720 Life (years) 8 8
If More than 2 alternatives you are Company and to decide of is trying investment A > Incremental analysis (Alternativ Alternative: A > Incremental analysis B C if the additional increment Worth while, compare. pairs wins then B vs C A Company Considering 2 different machines at MARR at 12% Both life spans = 10 years M/C X M/CY Initial Cost 160000 285000 Annual Operating Cost 45000 45000 Benefits per year Salvage Value 90000 105000 20000 40000
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10- A project needs $10000.00 expenditure at the end of 1st year and another $10000.00 at the end of 5th year. If the interest rate is 7%, what is the Equivalent Uniform Annual Cost (EUAC) of this project in 5 years? a) $4210.00 b) $1710.03 c) $4018.50 d) $2001.04
Two machines X and Y below are being considered for purchase. Machine X Machine Y Initial Cost Uniform annual benefit 200 1200 100 300 Salvage value Life, year 150 3 160 6 If the MARR is 5% which machine should be bought? Machine Y Machine X
Baguio Rabbitry must replace the piping system in its barn. Based on cost of capital of 12% which of the two following alternatives should be chosen using the following methods? a) RORAI b) AW c) PW Pamper pipes P 75,000 Fluid Flush P 90,000 First Cost Operating costs per 5,000 4,000 year Savings per year Salvage value 1,000 2,000 2,000 Useful life 10 10
Which process line should be built for a new chemical? The expected market for the chemical is 20 years. A 6% rate is used to evaluate new process facilities, which are compared with present worth. How much does the better choice save? Option Salvage Life 1 2 First Cost $15 M $20 M O&M Cost/Year $5 M $3 M $4 M $6 M 10 years 20 years
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Use Annual Cost Analysis to determine whether Alternative A or B should be chosen. The analysis period is 5 years. Assume an interest rate of 6% per year, compounded annually Alternative A Alternative B Initial Cost Annual Benefit Salvage Value Useful Life (yrs) 1800 150 400 5 4230 340 2100 5 Alternative B should be chosen, because its annual benefit is higher than Alternative A's Alternative A should be chosen, because its initial cost is lower than Alternative B's Alternative B should be chosen, because its equivalent annual cost is $85.30 higher than Alternative A's Alternative A should be chosen, because its equivalent annual cost is $85.30 lower than Alternative B's
4.39 A new machine is expected to cost $6000 and have a life of 5 years. Maintenance costs will be $1500 the first year, $1700 the second year, $1900 the third year, $2100 the fourth year, and $2300 the fifth year. How much should be deposited in a fund that earns 9% per year, compounded monthly, in order to pay for this machine? Ans. $13 180
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3 If a project schedule is accelerated, it is possible to complete the project in B-months rather than A-months. This would allow the developer an additional profit of $X per month over the saved time. The cost of acceleration is an extra $Y per month over the B-months of construction. If the interest rate for interim financing is C%, should the project be accelerated? A= B= C= X= Y= PW of savings PW of costs 25 months 19 months 9% $17,700 $4,700 Should the project be accelerated? Try Again Try Again What is the break-even level of increased monthly costs? Try Again