A machine purchased a year ago for $85,000 costs more to operate than anticipated. At the time of the purchase, it was expected tobe used for 10 years with annual maintenance costs of $22,000 and a salvage value of $10,000. However, last year, it incurred a cost$35000, which is expected to escalate to $36,400 this year and increase by $1400 each year thereafter. The market value is nowestimated to be $66000-$10000k, where k is the number of years since the machine was purchased. It is now estimated that themachine will be useful for a maximum of 4.00 more years. A replacement study is to be performed. Determine the values of P, n, AOCfor year 4.00 and S of this defender.The value of P is $The value of n isThe AOC for year 4.00 isThe value of S is $years.

Purchase price (P) = $85,000Original expected life (n) = 10 yearsOriginal annual maintenance =…

Answered: A machine purchased a year ago for…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Last year, a decision was made to keep the same equipment in lieu of buying new equipment. The old equipment's trade-in value last year was $4000 and its value this year is $2000. The operating cost was $700 last year. If bought last year, the new equipment would have cost $11K, the salvage value after 8 years would be $2000, and it would have an annual operating cost of $4000. If bought last year, what would have been the EUAC of the new equipment (in dollars) at 17% interest rate per year? (provide your answer in the box as a negative value if you arrive at costs) What would have been the correct decision? (provide your answer and justification in your pdf file submission)
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
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Four years ago, an industrial batch oven was purchased for $24,000. If sold now, the machine will bring $2500. If sold at the end of the year, it will bring $1500. Salvage value will decline by 20% each additional year. Annual operating costs for subsequent years are $3800 next year and then increase at 8% per year. A new machine will cost $49,000 with a 12-year economic life and have a $3000 salvage value. The operating cost will be $3000 as of the end of each year, with the $6000-per-year savings due to better quality control. If the firm's MARR is 10%, should the machine be purchased now? What is the defender's economic life? year(s) What is the AEC of the defender at its economic life? $ What is the AEC of the challenger at its economic life? $ Please choose your conclusion below:
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.
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Allen Construction purchased a crane 6 years ago for $130,000. They need a crane of this capacity for the next 5 years. Normal operation costs $35,000 per year. The current crane will have no salvage value at the end of 5 more years. Allen can trade in the current crane for its market value of $40,000 toward the purchase of a new one, which costs $150,000. The new crane will cost only $8,000 per year under normal operating conditions and will have a salvage value of $55,000 after 5 years. If MARR is 20%, determine which option is preferred. a) Use cash flow approach (insider's viewpoint approach) b) Use the opportunity cost approach (outsider's viewpoint approach)
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A machine that cost $120,000 3 years ago can be sold now for $51,500. Its market value is expected to be $40,000 and $20,000 1 year and 2 years from now, respectively. Its operating cost was $18,000 for the first 3 years of its life, but the M&O cost is expected to be $23,000 for the next 2 years. A new improved machine that can be purchased for $135,500 will have an economic life of 5 years, and an operating cost of $9,000 per year, and a salvage value of $32,000 whenever it is replaced. At an interest rate of 10% per year, determine if the presently owned machine should be replaced now, 1 year from now, or 2 years from now. The annual worth of the existing machine one year from now is $- 50500 O. the annual worth of the existing machine two years from now is $- 30,500 . and the annual worth of the new machine is $-112,500 The presently owned machine should be replaced now 13
A machine purchased a year ago for $85,000 costs more to operate than anticipated. At the time of the purchase, it was expected to be used for 10 years with annual maintenance costs of $22,000 and a salvage value of $10,000. However, last year, it incurred a cost $38,000, which is expected to escalate to $39,300 this year and increase by $1,300 each year thereafter. The market value is now estimated to be $81,000–$10,000k, where k is the number of years since the machine was purchased. It is now estimated that the machine will be useful for a maximum of 6 more years. A replacement study is to be performed. Determine the values of P, n, AOC for year 6 and S of this defender. The value of P is $ _______ . The value of n is_______ years. The AOC for year 6 is______ . The value of S is $______ .
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A machine that cost $120,000 3 years ago can be sold now for $52,750. Its market value is expected to be $40,000 and $20,000 1 year and 2 years from now, respectively. Its operating cost was $18,000 for the first 3 years of its life, but the M&O cost is expected to be $23,000 for the next 2 years. A new improved machine that can be purchased for $136,750 will have an economic life of 5 years, and an operating cost of $9,000 per year, and a salvage value of $32,000 whenever it is replaced. At an interest rate of 10% per year, determine if the presently owned machine should be replaced now, 1 year from now, or 2 years from now. The annual worth of the existing machine one year from now is $- now is $- ], and the annual worth of the new machine is $- The presently owned machine should be replaced (Click to select) the annual worth of the existing machine two years from

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