You purchase equipment for $13,000,000To operate the equipment, you incur expenses of $3,900,000 per yearThe equipment generates revenue of $8,400,000 per year5.a) What is the non-discounted (i 0% ) payback period?b) What is the payback period at MARR = 15%?%3D%3D

In economics, present value refers to the current value of a future stream of cash flow. Future…

5. You purchase equipment for $13,000,000 To operate the equipment, you incur expenses of $3,900,000 per yea The equipment generates revenue of $8,400,000 per year a) What is the non-discounted (i 0% ) payback period? b) What is the payback period at MARR = 15%? %3D %3D

5. You purchase equipment for $13,000,000 To operate the equipment, you incur expenses of $3,900,000 per yea The equipment generates revenue of $8,400,000 per year a) What is the non-discounted (i 0% ) payback period? b) What is the payback period at MARR = 15%? %3D %3D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

1.) Clinix is considering four independent projects. Given: All the projects will be economically viable for only 10 years; Company’s MARR = 12% per year Find: Which project should be selected based on a present worth analysis. *Note* Financial values are in $1,000 units. Project A Project B Project C Project D First Cost ($) -2,700 -1,400 -10,000 -9,500 Annual Net Profit ($/year) 800 1,200 2,400 3,200 Salvage Value ($) 25 30 45 60
Please fill out the spaces and answer the questions. Use table provided.
Question 1 A design firm is considering multiple independent projects for the upcoming quarter. For a MARR of 6.5% per quarter. What is your recommendation to the company based on a PW analysis? Project Initial Payment Monthly Costs (Today) A $1,500,000 $170,000 B $245,000 $200,000 C $300,000 $150,000 Payments are inflows for the design firm. Costs are outflows for the design firm. Payment at month 12 of $1,000,000 Costs at month 9 of $100,000 None Final Payment (At end of project) $3,000,000 Project Length Other Cash flows 2 years $3,000,000 18 months $4,000,000 30 months
Give typing answer with explanation and conclusion A small company purchased now for $120,000 will lose $300 each year for the first four years. An additional $600 in the company in the fourth year will result in a profit of $9500 each year from the fifth through the twelfth year. At the end of 12 years, the company can be sold for $135,000. a) Draw the cash flow diagram b) Determine the IRR for this project. c) Calculate the FW if MARR is 5%. d) Calculate the ERR when ε = 7%.
The Allianz Company produces a specialty wood furniture product, and has the following information available concerning its inventory items: Relevant ordering costs per purchase order $510 Relevant carrying costs per year for each product: Required annual return on investment 15% Required other costs per year $7 Annual demand is 30,000 products per year. The purchase price per product is $50. What is the annual relevant carrying costs?
Question 3.4 (15pts) Consider the following two mutually exclusive projects: a What assumption(s) do you need in order to compare a set of mutually exclusive service projects with unequal service lives? b With the assumption(s) defined in part (a) and using 10%, determine which project should be selected. c If your analysis period (study period) is just 4 years, what would be the salvage value of project 42 at the end of year 4 to make the two alternatives economically indifferent? Question 3.4 (15pts) Consider the following two mutually exclusive projects: Year A1 0 -$1,800 A2 -$3,600 1 -$500 -$ 600 2 -$500 - $600 3 -$500 - $600 4 -$500 - $600 5 $ 500+400 - $600 6 - $600 - $600 $600+1000 7 8 a What assumption(s) do you need in order to compare a set of mutually exclusive service projects with unequal service lives? b With the assumption(s) defined in part (a) and using 10 %, determine which project should be selected. c If your analysis period (study period) is just 4 years, what…
1. The Present Worth Method A project your firm is considering for implementation has these estimated costs and revenues: an investment cost of $50,000; maintenance costs that start at $5,000 at the end of year (EOY) 1 and increase by $1,000 for each of the next 4 years, and then remain constant for the following 5 years; savings of $20,000 per year (EOY 1–10); and finally a resale value of $35,000 at the EOY 10. If the project has a 10-year life and the firm’s MARR is 10% per year, what is the present worth of the project? Is it a sound investment opportunity?
5. Solve the given question and give the correct answer.
Maintenance money for a new building at a college is be ing solicited frompotential alumni donors. You would like to make a donation to cover all future expected maintenance costs for the building. These maintenance costs are expected to be $40,000 each year for the first five years, $50,000 for each of years 6 through 10, and $60,000 each year after that. (The building has an indefinite service life.)(a) If the money is placed in an account that will pay 13% interest compounded annually, how large should the gift be?{b) What is the equivalent annual maintenance cost over the infinite servicelife?
You have decided to open a microbrewery selling university-themed beers as one of your product lines. You need to conduct a breakeven analysis of sales and price. You know your fixed costs but based on your marketing plan you are not sure of pricing and sales. Your company MARR is 5%, and fixed costs include an initial capital investment of $250,000 with fixed annual expenses of $100,000. Use a 5-year planning horizon and assume that these expenses will not grow with inflation. a. Draw the cash flow diagram. b. Populate the following table and plot the NPW results in a meaningful plot. (Make sure you label your axis, and your plot should contain three curves.) c. Make a pricing recommendation as a function of sales. You would like to make a minimum of $100,000 for your work on this project.
ENGINEERING ECONOMY RATE WILL BE GIVEN. WRITE THE COMPLETE SOLUTIONS/EXPLANATION LEGIBLY OR TYPEWRITTEN. GIVE STRAIGHT TO THE POINT EXPLANATION. Your company presently uses a crew of its own employees for all major maintenance. On average, 44 major repairs are performed each year at 20 lost production hours per repair. Keeping the crew costs $1,300,000 per year plus any lost production cost. Lost production costs are estimated at $2,500 per hour. Your company is considering replacing its in-house maintenance work with an outside company (Ajax) working under an annual maintenance contract. This proposal will pay Ajax $2,180,000 per year but your company will still have to pay for all lost production time. Ajax claims that the time per repair will decrease because of the contractors’ substantial maintenance experience. Assuming the number of major repairs and the cost of lost production time remain the same, how much time per repair is the maximum allowable for Ajax to be the…
You are considering an investment project with the financial information provided below. Suppose the company is most concerned about the impact of its price estimate on the project's rate of return. How would you address this concern? The break-even value of unit price is ?