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 , 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 O

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 , 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 O

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Engineering economics
21
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.
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Economics Compare two CNC machines, A and B, on the basis of a present worth evaluation, and select the best alternative using i- 10% per year and a study period of 6 years. Alternative A First cost, $ -15,000 -28.000 Annual operating cost, S/year Major Maintenance in year 4, S -6,000 -9,000 -2000 Salvage value,S 3,000 5,000 Life, years Market value for machine A, at year 6 is 4,000, and 7,000 for machine O -15,000 - 6000(P/A,106,6) - 12,000(P/F,10%,4) + 4000(P/F,106,6)= S- 57,069.82; Select machine A O -15,000 - 6000(P/A,10%,6) - 12,000(P/F,10%,4) + 4000(P/F,10%,6) = 5-47,069.82; Select machine A O -28,000 - 9000(P/A,10%,6) - 2000(P/F,10%,4) - 7000(P/F,10%,6) = 5-81,445.86; Select machine B O 28,000 - 9000(P/A,10%,6) - 2000(P/F,10%,4) - 7000(P/F,10%,6)= S-64,612.05; Select machine B
Question 3 For the below ME alternatives, which machine should be selected based on the PW analysis. MARR=10% First cost, $ Annual cost, $/year Salvage value, $ Life, years Machine A Answer the below questions: A- PW for machine A= 23,979 8,679 4,000 Machine B 30000 6,000 5,000 Machine C 10000 4,000 1,000
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Typically, there are two alternatives in a replacement analysis. One alternative is to replace the defender now. The other alternative is which of the following? A. Keep the defender for its remaining useful life.B Keep the defender for another year and then reexamine the situation. C Keep the defender until an improved challenger better than the current challenger comes to marketD. Keep the defender as long as it’s operational.
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What two cost categories form the trade off that leads to an optimum replacement interval? a. Direct costs and indirect costs b. Insider costs and outsider costs c. Operating & maintenance costs and capital recovery costs d. Sunk costs and opportunity costs.
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If Asset is purchased for 'X' value pesos. It has no salvage value but athere is a useful life of 'N'-year. Which one of the following statements about the SINKING FUND METHOD is TRUE?a.) The book value of the asset is X/2 after exactly N/2 years.b.) The book value of the asset is X/2 after less than N/2 years.c.) The book value of the asset is X/2 after more than N/2 years.