A company is considering constructing a plant to manufacture a proposed new product. The land costs $250,000, the building costs $650,000, the equipment costs $300,000,and $80,000 additional working capital is required. It is expected that the product will result in sales of $700,000 per year for 11 years, at which time the land can be sold for$350,000, the building for $400,000, and the equipment for $50,000. All of the working capital would-be recovered at the EOY 11. The annual expenses for labor, materials,and all other items are estimated to total $500,000. If the company requires a MARR of 14% per year on projects of comparable risk, determine if it should invest in the newproduct line. Use the AW method.Click the icon to view the interest and annuity table for discrete compounding when the MARR is 14% per year.

Step 1:As per given information:Initial cost:Land: $250,000Building: $650,000Equipment:…

Answered: A company is considering constructing a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $80,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs would increase $6,000 using the gang punch, but annual raw material costs would decrease $12,000. MARR is 5.5% /year. What is the present worth of this investment?
A company owns a fleet of trucks and operates its own maintenance shop. A particular type of truck, generally used for five years, has an initial cost of $75,000 and a salvage value of $15,000. Maintenance cost is $5,000 per year, and it increases by $2000 yearly. Assuming interest at 10%, find the equivalent annual cost of owning and maintaining the truck.
You are trying to decide between two mobile phone carriers. Carrier A requires you to pay $185 for the phone and then monthly charges of $60 for 24 months. Carrier B wants you to pay $115 for the phone and monthly charges of $76 for 12 months. Assume you will keep replacing the phone after your contract expires. Your cost of capital is 4.1% APR, compounded monthly. Based on cost alone, which carrier should you choose? ... The EAA for plan A is $ (Round to the nearest cent.) The EAA for plan B is $ (Round to the nearest cent.) Based on the cost alone, you will choose (Select from the drop-down menu.)
Engineering Economics You bought a new car which you intend to use as a public utility vehicle for P950,000. The expected life of the car is ten (10) years for its intended use. Your driver and you agreed that for the first five (5) years , your “boundary” is P1,500.00 per day and P1,000.00 per day for the rest of its economic life. You also expected a repair and maintenance costs of P30,000 every six (6) months from year one (1) to five (5) and P50,000 from year six (6) to ten (10). At the end of 10 years you can sell the car for P100,000. If your MARR on invested capital is 15% every (6) months, determine whether this is a good investment. Use the present Worth method in your solution. Indicate all other assumptions you use in your analysis.Use manually solve and don't use excel.
An equipment costing $57,500 is being considered for a production process at Dewey Chemicals. The expected benefits per year is $4,500 and estimated salvage value is $10,000. Determine the rate of return the company can get in this equipment proposal. Equipment life = 15 years.
Planning to open a branch of a business requires an initial capital of 1000 to rent a place, purchase equipment, etc. After the end of the 10 year evaluation period, all used equipment can be resold for 300. The estimated amount of income and expenditure each year is shown in the following cash flow diagram using Future Worth (FW):
Your firm is thinking about investing $300,000 in the overhaul of a manufacturing cell in a lean environment. Revenues are expected to be $39,000 in year one and then increasing by $13,000 more each year thereafter, Relevant expenses will be $20,000 in year one and will increase by $10,000 per year until the end of the cell's nine-year life. Salvage recovery at the end of year nine is estimated to be $10,000. What is the annual equivalent worth of the manufacturing cell if the MARR is 10% per year? How sensitive is the annual worth to ± 10% changes in the MARR? Are changes in the MARR really a significant consideration in this problem? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 9% per year. E Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year. Find Annual Equivalent…
Problem 03.013- Annual worth calculations What is the equivalent annual cost in years 1 through 9.00 of a contract that has a first cost of $77,000 in year 0 and annual costs of $17,000 in years 3 through 9.00? Use an interest rate of 15.00% per year. (Round the final answer to three decimal places.) The equivalent annual cost is determined to be $ I
If the interest rate is 4%, what is the approximate future value of $15,000 in 10 years? $15,900 $17,949 $10,133 $22,204
Your firm is thinking about investing $300,000 in the overhaul of a manufacturing cell in a lean environment. Revenues are expected to be $33,000 in year one and then increasing by $11,000 more each year thereafter. Relevant expenses will be $20,000 in year one and will increase by $10,000 per year until the end of the cell's seven-year life. Salvage recovery at the end of year seven is estimated to be $11,000. What is the annual equivalent worth of the manufacturing cell if the MARR is 8% per year? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 8% per year. The annual equivalent worth of the manufacturing cell is $. (Round to the nearest dollar.)
Value Lodges owns an economy motel chain and is considering building a new 200-unit motel. The cost to build the motel is estimated at $8.000.000; Value Lodges estimates furnishings for the motel will cost an additional $700.000 and will require replacement every 5 years. Annual operating and maintenance costs for the motel are estimated to be $800,000. The average rental rate for a unit is anticipated to be $40/day. Value Lodges expects the motel to have a life of 15 years and a salvage value of $900.000 at the end of 15 years. This estimated salvage value assumes that the furnishings are not new. Furnishings have no salvage value at the end of each 5-year replacement interval. Assuming average daily occupancy percentages of 50%, 60%, 70%, and 80% for years 1 through 4, respectively, and 90% for the 5th through 15th years, a MARR of 12%/year, 365 operating days/year, and ignoring the cost of land, should the motel be built? Base your decision on an internal rate of return analysis.…
Problem 03.015- Annual worth calculations Improvised explosive devices (IEDs) are responsible for many deaths in times of strife and war. Unmanned ground vehicles (robots) can be used to disarm the IEDs and perform other tasks as well. If the robots cost $125,000 each and the military arms unit signs a contract to purchase 4,000 of them now and another 7,500 one year from now, what is the equivalent annual cost of the contract over a 8.00-year period at 12.00% per year interest? (Round the final answer to three decimal places.) The equivalent cost of the contract is determined to be $

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