2. What is the annual capital recovery for the machine listed below applying an interest rate of 8.0%?Purchase SalvageAnnual OperatingCostCostIncomeLife Years46,000360028,0006

The capital recovery factor is a ratio used to calculate the present value of an annuity (a series…

Answered: 2. What is the annual capital recovery…

2. What is the annual capital recovery for the machine listed below applying an interes Purchase Salvage Annual Operating Cost Income Cost Life Years 46,000 3600 28,000 6

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

2. What is the annual capital recovery for the machine listed below applying an interest rate of 8.0%?
Purchase Salvage
Annual Operating
Cost
Cost
Income
Life Years
46,000
3600
28,000
6

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In order to make a replacement decision, a firm calculated the equivalent annual cost of owning an asset as follows: EUAC Annual EUAC Replacement Capital Repair Repair Period Costs Costs Costs 1 2 3 4 5 $1,287- $1,082 $400 $189 $976 $600 $298 in 1 year $812 $800 $437 $673 $1,200 $592 When should the company replace the equipment? in 2 years O in 4 years in 5 years in 3 years
. A manager has been presented with two proposals for automating a production process. Proposal A involves an initial cost of $15,000 and an annual operating costof $2,000 per year for the next 4 years. Thereafter, the operating cost is expected to increase by $100 per year. This equipment is expected to have a 10-year life with no salvage value.Proposal B requires an initial investment of $28,000 and an annual operating cost of $1,200 per year for the first 3 years. Thereafter, theoperating cost is expected to increase by $120 per year. This equipment is expected to last for 20 years and will have a $2,000 salvage value. If the company's minimum attractive rate of return is 10%, which proposal should be accepted on the basis of present worth analysis?
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