A critical machine in BHP Billiton's copper refining operation was purchased 7 years ago for $160,000. Last year a replacement studywas performed with the decision to retain it for 3 more years. The situation has changed. The equipment is estimated to have a valueof $8000 if "scavenged" for parts now or anytime in the future. If kept in service, it can be minimally upgraded at a cost of $43,000 tomake it usable for up to 2 more years. Its operating cost is estimated at $22,000 in the first year and $29,000 in the second year.Alternatively, the company can purchase a new system, the challenger, that will have an AWC of $-51,000 over its ESL. Use a MARR of10% per year and annual worth analysis to determine when the company should replace the machine.The AW value of the challenger is $- 47254.1275and the AW value of the defender at the end of year 2 is $- 59000The company should replace the machine after two years

The objective of the question is to determine when the company should replace the machine using the…

Answered: A critical machine in BHP Billiton's…

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

help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working
Which of the following statements is CORRECT about replacement analysis where service lives of defender and challenger are unequal? Group of answer choices If the asset will be needed indefinitely use a study period approach. If asset replacement is a one-time occurrence, use a study period approach. In the study period approach, longer study period is best for projects with definitive end. For projects that are needed for a specific number of years, assume “Repeat Replacement.”
Please solve without using excel, solve using formulas or tables
Huntington Medical Center purchased a used low-field MRI scanner 2 years ago for $445,000. Its operating cost is $225,000 per year and it can be sold for $125,000 anytime in the next 3 years. The Center's director is considering replacing the presently owned MRI scanner with a state-of-the-art 3 Tesla machine that will cost $2 million.The operating cost of the new machine will be $220,000 per year, but it will generate extra revenue that is expected to amount to $425,000 per year. The new unit can probably be sold for $725,000 3 years from now. You have been asked to determine how much the presently owned scanner would have to be worth on the open market for the AW values of the two machines to be the same over a 3-year planning period. The Center's MARR is 9% per year. The presently owned scanner should be worth $ on the open market.
Solve step by step detailed answer
4. A 3-year-old manufacturing equipment, which has a present market value of $13,000, is being considered for early replacement. The estimated five-year market values and annual operating costs are shown below. The AW replacement values of year 1 and 2 have already been conducted, help the company determine the total AW3 replacement value (year 3 only) which will consider how long the asset should be retained, its ESL. The interest rate is 10% per year. Year j (1) 1 2 345 MV, (2) $9000 8000 6000 2000 0 AOC, (3) $-2500 -2700 -3000 -3500 -4500
Digital Tech Dynamics purchased a new quality inspection system for $550,000. The estimated salvage value was $50,000 after 10 years. Currently, the expected remaining life is 7 years with an AOC of $45,000 per year and an estimated salvage value of $40,000. The new president has recommended early replacement of the system with one that costs $450,000 and has a 12-year economic service life, a $35,000 salvage value, and an estimated AOC of $50,000 per year. If the MARR for the corporation is 12% per year, use factor-based relations to determine the minimum trade-in value necessary now to make the president's replacement economically advantageous. The minimum trade-in value necessary now to make the president's replacement economically advantageous is $
Required information For equipment that has a first cost of $10,500, the estimated operating costs and year-end salvage values are as shown. Year Operating Cost, $ Salvage Value, $ 1 -1,000 7,000 2 -1,200 5,000 3 -1,300 4,500 4 -2,000 3,000 5 -3,000 2,000 Determine the economic service life ESL, at i= 10% per year using factors. The economic service life ESL, is 4 O years with the AW $- 5982.12 =
Stahmann Products paid $350,000 for a numerical controller and had it installed at a cost of $50,000. The recovery period was 7 years with an estimated salvage value of 10% of the original purchase price. Stahmann sold the system 4 years after it was purchased for $45,000. State the numerical values for the following: remaining life at sale time, market value at sale time, and book value at sale time if 65% of the basis had been depreciated. The remaining life at sale time is years. The market value at sale time is $ . The book value at sale time if 65% of the basis has been depreciated is $ .
Define replacement analysis
Part a.) An engineer with Calahan Technologies calculated the AW of cost values shown for a presently owned machine using estimates she obtained from the vendor and company records. A challenger has an economic service life of 7 years with an AW of $-86,000 per year. Assume that all future costs remain as estimated and the challenger's technology will definitely replace that of the defender within 5 years. When should the company purchase the challenger? Retention Period, Years AW of Costs, $ per Year -92,000 2 -81,000 -87,000 4 -89,000 5 -95,000 Part b.) The costs and revenue projections for a new product made on the machine from Part a.) are estimated below. What is the estimated profit at a production rate of 25% above breakeven? Fixed cost = $592,000 per year Production cost per unit = $198 Revenue per unit = $330
A 5 year-old tooling kit that was purchased new for $9000 has a current market value of $4000 and expected 0&M costs of $3000, increasing by $1200 per year. Future market values are expected to decline by 25% annually (going forward). The kit can be used for another 3 years at most. The optimal replacement kit costs $8000 and has 0&M costs starting at $2500 per year, increasing by $2000 per year. Salvage value for the new kit at the end of the first year is $4000 and falls by $1000 per year thereafter (until zero). The new model kit will be needed indefinitely. Assume a unique minimum AEC~(15%) for both kits (both the current and replacement kit). The MARR is 15%. 1) What is the AECC• ? a) Less than 6925.70 b) 6925.70-6945.70 c) 6945.70-6965.70 ) d) 6965.70-6985.70 e) More than 6985.70

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS