2. The following maintenance alteratives are considered for a new assembly line that has an acquisition cost of $250,000. Each has distinct service life expectancies and corresponding probabilities. Determine the maintenance regime most likely to yield an annualized overall cost less than $32k, given an annual rate of 7%. Maintenance regime Service life years (probability) $0 throughout life 7(0.2) 8(0.6) 9(0.2) $25000 (in year 4) 8 (0.15) 10 (0.5) 12 (0.35) $35,000 (years 3 and 6) 10 (0.25) 12 (0.5) 14 (0.25) $75,000 (year 6) 12 (0.3) 13 (0.33) 15 (0.37)

2. The following maintenance alteratives are considered for a new assembly line that has an acquisition cost of $250,000. Each has distinct service life expectancies and corresponding probabilities. Determine the maintenance regime most likely to yield an annualized overall cost less than $32k, given an annual rate of 7%. Maintenance regime Service life years (probability) $0 throughout life 7(0.2) 8(0.6) 9(0.2) $25000 (in year 4) 8 (0.15) 10 (0.5) 12 (0.35) $35,000 (years 3 and 6) 10 (0.25) 12 (0.5) 14 (0.25) $75,000 (year 6) 12 (0.3) 13 (0.33) 15 (0.37)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section9.A: Depreciation

Problem 1P

See similar textbooks

Similar questions

The table given below lists the relevant cost items for a specific system purchase. The operating expenses for the new system are $10,000 per year, and the useful life of the system is expected to be five years. The salvage value for depreciation purposes is equal to 25% of the hardware cost. Cost Item Cost Hardware $160,000 Training $15,000 Installation $15,000 a) What is the Book Value (BV) of the device at the end of year three if the Straight Line (SL) depreciation method is used? b) Suppose that after depreciating the device for two years with the SL method, the firm decides to switch to the double declining balance depreciation method for the remainder of the device's life (the remaining three years). What is the device's BV at the end of four years?
Reference: Case Study S Dunn Manufacturing is considering the following two alternatives. The cost information for the two proposals for replacing an equipment are provided are in table below. Initial cost Benefits/year Machine X $120,000 $20,000 for the first 10 years and $9,000 for the next 10 years Life Salvage value $40,000 MARR 5.2. The NPW of machine X is A) $35,158 B) $48,192 C) $50,752 Machine Y $96,000 $12,000 per year for 20 years. 20 years 8% $20,000
In the design of a special-use structure, two mutually exclusive alternativesare under consideration. These design alternatives are as follows: If perpetual service from the structure is assumed, which design alternative do you recommend? The MARR is 10% per year.
A project with the following costs are under consideration to determine its profitability. Using the IRR comparison, and an annual MARR of 10% compounded semiannually. determine if the project should be executed. First cost : $51,300 Semiannual operating cost : $10,000 Semiannual income : $20,000 : $20,,000 : 4 years Salvage value Life in years O a. IRR = 15% semiannual O b. IRR 15.83% semiannual O c. IRR 16.9% semiannual O d. IRR 18.7% semiannual
An engineer must choose between two technically equivalent alternatives, A and B. Based upon the data in the table below over the 12year analysis period and an interest rate of 9%, the PW of machine A is: A B First Cost $3,000 $6,000 Annual Maintenance $500 $300 End of Useful Life Salvage Value $700 $1,000 Useful Life 5 years |15 уears O PWA=-3000-3000(P/F,9%,5)-3000(P/F,9%,10)-500(P/A,9%,15)+700(P/F,9%,5)+700(P/F,9%,10)+700(P/F,9%,15) O PWA=-3000-3000(P/F,9%,10)-500(P/A,9%,15)+700(P/F,9%,5)+700(P/F,9%,10)+700(P/F,9%,15) O PWA=-3000-3000(P/F,9%,5)-3000(P/F,9%,10)-500(P/F,9%,15)+700(P/F,9%,5)+700(P/F,9%,10)+ 700(P/F,9%,15) O PWA=-3000-3000(P/F,9%,5)-3000(P/F,9%,10)-500(P/A,9%,10)+700(P/F,9%,5)+700(P/F,9%,10)+ 700(P/F,9%,15)
An injection molding system has a first cost of $175,000 and an annual operating cost of $95,000 inyears 1 and 2, increasing by $6,000 per year thereafter.The salvage value of the system is 25% ofthe first cost regardless of when the system is retired within its maximum useful life of 5 years.Using a MARR of11% per year, determine the ESL and the respective AW value of the system.
Two alternatives are being considered for installation. Which should be selected based on an interest rate of 5.6% per year ? Alternative A Alternative B First Cost, $ 135,000 462,000 Annual Operating Cost, $/yr 76,000 34,600 Salvage value, $ 71,200 n/a Life, years 9 ∞
A project requires an initial investment of 45,000$, has a salvage value of 11,000$ after six years, incurs annual expenses of 9,000$, and provides an annual revenue of 16,000$. Using MARR of 10%, determine the AW of this project detailed answer without using excel
A tunnel to transport water initially cost $1,000,000 and has expected maintenance costs that will occur in a 6-year cycle as shown below, assume MARR is 5% per year. End of Year Maintenance $35,00 535,000 535,000 $45,000 S48,000 so0.00) Compute the Equivalent Annual Cost of the maintenance. Hint: Don't insert the negative sign Compute the Capitalized Cost? Hint: Don't insert the negative sign
A piece of equipment has a first cost of $165,000, a maximum useful life of 7 years, and a market (salvage) value described by the relation S = 120,000 – 23.000k, where k is the number of years since it was purchased, The salvage value cannot go below zero. The AOC series is estimated using AOC = 60,000 + 12,000k. The interest rate is 13% per year. Determine the economic service life and the respective AW. The economic service life is 4 year(s) and the AW value is $ 100,000 a
Two alternatives are under consideration for maintenance of a bridge. Select the most cost-effective alternative using equivalent uniform annual cost method. Assume an interest rate of 9% per year and a design life of 70 years for each alternative. Alternative I consists of annual maintenance costs of $10,000 per year for design life except: Year 30, in which bridge deck repairs will costs $30,000 Year 40, in which a deck overlay and structural repairs will cost $150,000 Alternative II comprises annual maintenance costs of $6,000 per year for design life except for: Year 30, in which bridge deck repairs will cost $45,000 Year 40, in which a deck overlay and structural repairs will cost $125,000.
An engineering analysis by net present worth (NPW) is to be made for the purchase of two devices, A and B. If an 8% interest rate is used, recommend the device to be purchased.