A five-year-old defender has a current market value of $4,500 and expected O&M costs of $3,000 this year, increasing by $1,400 per year. Future market values are expected to decline by $800 per year. The machine can be used for another three years. The challenger costs $9,000 and has O&M costs of $1,800 per year, increasing by $900 per year. The machine will be needed for only three years, and the salvage value at the end of that time is expected to be $2,200. The MARR is 11%. Click the icon to view the interest factors for discrete compounding when MARR = 11% per year. (a) Determine the annual cash flows for retaining the old machine for three years. Fill in the table below. (Round to the nearest dollar.) Cash Flows (Defender) Period 0 1 2 3 $ (b) Determine whether now is the time to replace the old machine. First show the annual cash flows for the challenger. Fill in the table below. (Round to the nearest dollar.) Cash Flows (Challenger) O Yes O No Period 0 1 2 3 The equivalent annual cost (AEC) of retaining the machine is $. (Round to the nearest dollar.) The equivalent annual cost (AEC) of replacing the machine is $ . (Round to the nearest dollar.) Should the company replace the old machine now? Choose the correct answer below. S $
A five-year-old defender has a current market value of $4,500 and expected O&M costs of $3,000 this year, increasing by $1,400 per year. Future market values are expected to decline by $800 per year. The machine can be used for another three years. The challenger costs $9,000 and has O&M costs of $1,800 per year, increasing by $900 per year. The machine will be needed for only three years, and the salvage value at the end of that time is expected to be $2,200. The MARR is 11%. Click the icon to view the interest factors for discrete compounding when MARR = 11% per year. (a) Determine the annual cash flows for retaining the old machine for three years. Fill in the table below. (Round to the nearest dollar.) Cash Flows (Defender) Period 0 1 2 3 $ (b) Determine whether now is the time to replace the old machine. First show the annual cash flows for the challenger. Fill in the table below. (Round to the nearest dollar.) Cash Flows (Challenger) O Yes O No Period 0 1 2 3 The equivalent annual cost (AEC) of retaining the machine is $. (Round to the nearest dollar.) The equivalent annual cost (AEC) of replacing the machine is $ . (Round to the nearest dollar.) Should the company replace the old machine now? Choose the correct answer below. S $
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
answer quick please. Do not need full work
Transcribed Image Text:A five-year-old defender has a current market value of $4,500 and expected O&M costs of $3,000 this year, increasing by $1,400 per year. Future market values are expected to decline by
$800 per year. The machine can be used for another three years. The challenger costs $9,000 and has O&M costs of $1,800 per year, increasing by $900 per year. The machine will be needed
for only three years, and the salvage value at the end of that time is expected to be $2,200. The MARR is 11%.
Click the icon to view the interest factors for discrete compounding when MARR = 11% per year.
(a) Determine the annual cash flows for retaining the old machine for three years. Fill in the table below. (Round to the nearest dollar.)
Cash Flows
(Defender)
$
$
$
$
Period
(b) Determine whether now is the time to replace the old machine. First show the annual cash flows for the challenger. Fill in the table below. (Round to the nearest dollar.)
Cash Flows
(Challenger)
$
$
Yes
No
0
1
2
3
The equivalent annual cost (AEC) of retaining the machine is $
The equivalent annual cost (AEC) of replacing the machine is $
Should the company replace the old machine now? Choose the correct answer below.
Period
0
1
2
3
(Round to the nearest dollar.)
(Round to the nearest dollar.)
GA
S
Transcribed Image Text:N
123
2
4
LO
5
600
7
8
9
10
11
12
13
14
15
Single Payment
Compound
Amount
Factor
(F/P, i, N)
1.1100
1.2321
1.3676
1.5181
1.6851
1.8704
2.0762
2.3045
2.5580
2.8394
3.1518
3.4985
3.8833
4.3104
4.7846
Present
Worth Factor
(P/F, i, N)
0.9009
0.8116
0.7312
0.6587
0.5935
0.5346
0.4817
0.4339
0.3909
0.3522
0.3173
0.2858
0.2575
0.2320
0.2090
Compound
Amount
Factor
(F/A, i, N)
1.0000
2.1100
3.3421
4.7097
6.2278
7.9129
9.7833
11.8594
14.1640
16.7220
19.5614
22.7132
26.2116
30.0949
34.4054
Equal Payment Series
Sinking
Fund
Factor
(A/F, i, N)
1.0000
0.4739
0.2992
0.2123
0.1606
0.1264
0.1022
0.0843
0.0706
0.0598
0.0511
0.0440
0.0382
0.0332
0.0291
Present
Worth
Factor
(P/A, i, N)
0.9009
1.7125
2.4437
3.1024
3.6959
4.2305
4.7122
5.1461
5.5370
5.8892
6.2065
6.4924
6.7499
6.9819
7.1909
Capital
Recovery
Factor
(A/P, i, N)
1.1100
0.5839
0.4092
0.3223
0.2706
0.2364
0.2122
0.1943
0.1806
0.1698
0.1611
0.1540
0.1482
0.1432
0.1391
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 10 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
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 (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