None A firm is considering replacing a machine that has been used to make a certain kind of packagingmaterial. The new, improved machine will cost $31,000 installed and will have an estimated economicservice life of 10 years, with a salvage value of $2,500. Operating costs are expected to be $1,000 peryear throughoutthe service life of the machine. The old machine (still in use) had an original cost of $25,000 four yearsago, and at the time it was purchased, its service life (physical life) was estimated to be seven years, witha salvage value of $5,000. The old machine has a current market value of $7,700. If the firm retains theold machine, its updated market values and operating costs for the next four years will be as follows:Year-EndOperating CostsMarket ValueBook Value0$7,700$7,88914,3005,578$3,20023,3003,3473,70031,1001,1164,8004005,850The firm's MARR is 12%.(a) Working with the updated estimates of market values and operating costs over the next four years,determine the remaining useful life of the old machine.(b) Determine whether it is economical to make the replacement now.

To address these questions, we'll use the data provided to determine the remaining useful life of…

Answered: A firm is considering replacing a…

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

(Chapter 13) A $20,000 machine will be purchased by a company with an MARR of 10%. It will cost $5,000 to install and removal costs are insignificant. What is its economic life and minimum EUAC cost given the following O&M costs: YR, n 1 2 3 4 5 O&M $5,000 $8,000 $11,000 $14,000 $17,000
A certain machine has a initial cost of 50,000 and a book a value of 15,811.39 after five years. Find the salvage value of the machine if has an economic life of 10 years?
A construction firm purchased a used crane 2 years ago for $445,000. Its operating cost is $325,000 per year and it's expected salvage value 3 years from now is $145,000. The firm's CEO is considering replacing the presently owned used crane with a brand new crane with a much higher load limit which will cost $1.5 million. The operating cost of the new crane will be $260,000 per year, but its higher load limit will allow the contractor to generate extra revenue that is expected to amount to $525,000 per year. The new crane can probably be sold for $850,000 3 years from now. You have been asked to determine how much the presently owned crane would have to be worth on the open market today for the annual worth (AW) values of the two machines to be the same over a 3-year planning period. The contractor's MARR is 9% per year. The presently owned crane should be worth $ Con the open market.
With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal to that of machine Y at an interest rate of 12% per year. Determine the replacement value. Machine X Machine Y Market Value, $ ? 93,000 -40,000 for year 1,increasing by 2000 per year thereafter. Annual Cost, $ per Year -57,000 Salvage Value 18,500 20,000 Life, Years 3 The replacement value is $
What is the book value (to the nearest cent) for the asset in year 1 if straight-line method is used? Cost of $50,000 Asset Useful Life 6 Salvage $4,000 Value
With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal to that of machine Y at an interest rate of 11% per year. Determine the replacement value. Machine X Machine Y Market Value, $ ? 92,000 Annual Cost, $ per Year −60,000 −40,000 for year 1,increasing by 2000 per year thereafter. Salvage Value 11,500 16,000 Life, Years 3 5 The replacement value is $ .
3. Angstrom Technologies intends for the company to use the newest and finest equipment in its labs. Precision measurement equipment was purchased 7 years ago for $160,000. Last year a replacement study was performed with the decision to retain for 3 more years. The situation has changed. The equipment is estimated to have a value of $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 to make it usable for up to 2 more years. Its operating cost is estimated at $22,000 the first year and $25,000 the second year. Alternatively, the company can purchase a new system that will have an equivalent annual worth of $47,063 per year over its ESL. The company uses a MARR of 10% per year. Use annual worth analysis to determine when the company should replace the machine.
An industrial firm is considering purchasing a new machine for $25000. if the machine's capital recovery cost is calculated to be $3500 over its 5-year service life and the firm's MARR is 10% answer the following questions. a) Draw the cash flow diagram and load all the values appropriately. b) What salvage value has the firm assumed in calculating the machine capital recovery costs?
An item's initial cost is P 800,000, and its market worth after 5 years is P 507,630. Determine the equipment's estimated salvage value.
The Delta firm intends to buy a device called machine X. Machine X would cost $25,000 and have little salvage value after 10 years of use. The machine is anticipated to bring around $10,000 annually. Do the simple payback period calculation.
A specialty concrete mixer used in construction was purchased for $300,000 7 years ago. Its annual O&M costs are $105,000. At the end of the 8-year planning horizon, the mixer will have a salvage value of $5,000. If the mixer is replaced, a new mixer will require an initial investment of $375,000 and at the end of the 8-year planning horizon, the new mixer will have a salvage value of $45,000. Its annual O&M cost will be only $40,000 due to newer technology. Use an EUAC measure and a MARR of 15% to see if the concrete mixer should be replaced if the old mixer is sold for its market value of $65,000. Solve, a. Use the cash flow approach (insider’s viewpoint approach). b. Use the opportunity cost approach (outsider’s view point approach).
A machine costs P150,00O and will have a scrap value of P10000 when retired at the end of 15 years. If money is worth 4%, find the annual investment and the capitalized cost of the machine.

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