A new antitheft system incorporating MEMS technology is being separately evaluated economically by three engineers at DragonTechnologies. The first cost of the equipment will be $90,000, and the life is estimated at 6 years with a salvage value of $9000. Theengineers made different estimates of the net savings that the equipment might generate. Jacob made an estimate of $9,000 per year.Susan states that this is too low and estimates $18,000, while Tyler estimates $21,000 per year before tax. If the MARR is 8% per year,use PW to determine if these different estimates will change the decision to purchase the equipment.The present worth of the pessimistic estimate is $The present worth of the most likely estimate is $The present worth of the optimistic estimate is $The equipment purchase by the pessimistic estimate is not justifiedThe equipment purchase by the most likely estimate is not justifiedThe equipment purchase by the optimistic estimate is justified

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Answered: A new antitheft system incorporating…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the “shell” will cost $140,000 and is expected to have a $45,000 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $14,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $10,000 per year. If the company’s MARR is 12% per year, should the clamshell be purchased or leased on the basis of a future worth analysis? Assume the annual M&O cost is the same for both options. The future worth when purchased is $ . The future worth when leased is $ .
None
Jensen Systems purchases several parts for the instruments it makes via a fixed-price contract of $155,000 per year from a local supplier. The new president of Jensen wants to make the parts inhouse through the purchase of equipment that will have a first cost of $240,000 with an estimated salvage value of $30,000 after 5 years. The AOC is difficult to estimate, but company engineers have made optimistic, most likely, and pessimistic estimates of $70,000, $85,000, and $120,000 per year, respectively. Determine if the company should purchase the equipment under any of the operating cost scenarios. The MARR is 20% per year.
A-Z Technologies, a manufacturer of amplified pressure transducers, is trying to decide between a dual-speed and a variable-speed machine. The engineers are not sure about the salvage value of the variable speed machine, so they have asked several different used-equipment dealers for estimates. The results can be summarized as follows: there is a 35% chance of getting $18,000, a 41% chance of getting $24,000, and a 13% chance of getting $29,000. Also, there is an 11% chance that the company may have to pay $5000 to dispose of the equipment. Calculate the expected salvage value.
Hemisphere Electric may purchase equipment to manufacture a new line of wireless devices for home appliance control. The first cost of the equipment will be $78,000, and the life of the equipment is estimated to be 6 years with a salvage value of $10,000. Different people in marketing have provided revenue estimates that the devices will generate. The estimates range from a low of $10,000 to a high of $20,000, with an average of $16,000 per year. If the MARR is 9% per year, use PW to determine if these different estimates will change the decision to purchase the equipment. The present worth of low estimate range is $ The present worth of average estimate range is $ The present worth of high estimate range is $[ The $10,000 revenue estimate does not favor The $16,000 revenue estimate does not favor The $20,000 revenue estimate favors the purchase. the purchase. the purchase.
A manufacturing company has the choice of two suppliers to buy a piece of equipment from to use in its process. Characteristics of these two suppliers and associated costs are tabulated below. The equipment from supplier A costs more to buy and maintain, but it also has more revenue per unit sold. Selling enough units will at some point make it worth the higher cost. How many units per year must the company sell in order to justify using supplier A (i.e. what is the breakeven number of units to sell)? Use an interest rate of 12% per year. Supplier A Supplier B Initial cost $4,000 $3,000 Sale price (revenue per unit) $4 $3 Transportation costs (per unit) $0 $1.25 Annual maintenance cost $1,400 $1,100 Salvage value $800 $700 Useful life of the equipment (years) 5 4
Raytheon wishes to use an automated environmental chamber in the manufacture of electronic components. The chamber is to be used for rigorous reliability testing and burn-in. It is installed for $800,000, $350,000 of which is borrowed at 11% for 5 years, and will have a salvage value of $150,000 after 8 years. Its use will create an opportunity to increase sales by $650,000 per year and will have operating expenses of $250,000 per year. Corporate income taxes are 40%. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR, if the chamber is kept for 8 years. After-tax MARR is 10%. Use 7 years class depreciation for MARCS
Your Area Director wants to purchase new ergonomic office equipment for your staff. The total purchase price is quoted by Herman Miller to be $22,656. The main reason for the proposed purchase is the high rate of lost work days due to low back and wrist/hand issues. These are common problems associated with poor ergonomic position and repetition. You can sell the equipment in 8 years and have a salvage value of $4,619. It is estimated that the purchase of the new equipment will cut your lost work days by 61% and save you an estimated $11,812 per year in the costs associated with the lost work days. What is your EUAW for this proposed purchase at an interest rate of 6%? A. $7,354 B. $4,886 C. $8,631 D. $6,625
Preliminary plans are under way for the construction of a new stadium for a major league baseball team. City officials have questioned the number and profitability of the luxury corporate boxes planned for the upper deck of the stadium. Corporations and selected individuals may buy the boxes for $340,000 each. The fixed construction cost for the upper deck area is estimated to be $5,780,000, with a variable cost of $170,000 for each box constructed. (a) What is the break-even point for the number of luxury boxes in the new stadium? x = (b) Preliminary drawings for the stadium show that space is available for the construction of up to 52 luxury boxes. Promoters indicate that buyers are available and that all 52 could be sold if constructed. (ii) What profit is anticipated? (Enter a negative value if a predicted loss.) $
A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRS-GDS 5-year property class) is under consideration by a construction firm for $24,000. The instrument will be used for 6 years and be worth $1,000 at that time. The annual cost of use and maintenance will be $11,000. Alternatively, a more automated instrument (same property class) available from the manufacturer costs $28,500, with use and maintenance costs of only $7,500 and salvage value after 6 years of $2,500. The marginal tax rate is 25%, and MARR is an after-tax 12%.Determine which alternative is less costly, based upon comparison of after-tax annual worth. select an alternative Show the AW values used to make your decision:Alternative 1: $enter a dollar amount Alternative 2:

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