A new company is considering purchasing a new machine to replace its existing outdated one. The new machine costs $50,000 and is expected to last for 5 years. The maintenance cost for the new machine is estimated to be $2,000 per year, payable at the end of each year. The company expects the new machine to increase annual revenues by $12,000. However, due to technological advancements, the existing machine is expected to have increasing maintenance costs. The current maintenance cost for the old machine is $3,000, and it is expected to increase by $500 per year for the next 5 years. The old machine was purchased 2 years ago for $30,000 and was expected to last for a total of 8 years. The company uses a discount rate of 8% to evaluate the projects. Calculate the capitalized cost for the replacement option over the 5-year period.

A new company is considering purchasing a new machine to replace its existing outdated one. The new machine costs $50,000 and is expected to last for 5 years. The maintenance cost for the new machine is estimated to be $2,000 per year, payable at the end of each year. The company expects the new machine to increase annual revenues by $12,000. However, due to technological advancements, the existing machine is expected to have increasing maintenance costs. The current maintenance cost for the old machine is $3,000, and it is expected to increase by $500 per year for the next 5 years. The old machine was purchased 2 years ago for $30,000 and was expected to last for a total of 8 years. The company uses a discount rate of 8% to evaluate the projects. Calculate the capitalized cost for the replacement option over the 5-year period.

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

MARR QUESTION
Calculate the future worth (FW) at 10% of a project that will save $25K per year for 20 years. The first cost is $120K, and the salvage value is $20K. Compare this with the PW and the EAW. (Please show the process and solution ty.)
A company is trying to decide whether to keep a fork-truck in their factory or to purchase a new one. The existing fork-truck can be sold now for $28,000 or kept for another 5 years with an overhaul now costing $8,250. If the MARR is 10% should the company buy a new AVG now or keep the existing vehicle? Existing Fork-truck New Fork-truck Initial price cost, $ -34,250 (5 yrs ago) -38,250 AOC, $ -5,500 -7,800 Salvage value, $ 2,500 5,500 Life, yrs 10 12
Salim Service company owns several taxis that were purchased four years ago for $27000 each. The current market value is $10000 each. If they are kept for another 6 years, they can be sold for $2000 each. The annual maintenance cost per cab is $900 a year. Salim Service is looking at replacing the cabs with the option to lease new cabs at an annual cost of $9000 per year per cab which includes free maintenance. How much more would it cost them per year to switch to leasing? Assume an interest rate of 9%.
Pierre Rizzo is considering purchasing a new car. The price of the car is $60000, and Pierre hopes to keep it 4 years and then sell it for $19000. Based on past experience, Pierre drives about 12,000 km per year and lives in a downtown apartment where they must pay a $63 per month parking fee. Pierre has budgeted the following automobile expense items for the next 4 years: Expense Gasoline(13.7L Per 100KM)($1.71 Per Liter) Licence/Registration Insurance Maintenance Tires ($1407 per set that last 42000KM) Parking (48 Months) Interest Depreciation (STRAIGHT LINE) Cost Fixed/Variable Variable $483 Fixed $3309 Fixed $960 Variable Variable $3024 Fixed $3090 Fixed $ Fixed CALCULATE THE FOLLOWING USING THE ABOVE INFORMATION: TOTAL FIXED COSTS (TFC) TOTAL VARIABLE COSTS (TVC) TOTAL COSTS (TC) TOTAL KMS AVG. FIXED COSTS/KM $ AVG. VARIABLE COSTS/KM $ AVG. TOTAL COSTS/KM $ 48000KM
Motor A and B is providing 150hp and it is being used for 10 hours per day, 250 days in a year if the motor is using the electricity. Additional cost for both motors is the annual maintenance cost worth 1200 and other manufacturing overhead costing 550 per month. Motor A has an original price of 50,000 while 45000 for Motor B, and both have the salvage value of 3000 after 5 years. Machine efficiency is 92% and 90% respectively.A. How much is the electrical cost if the money is worth 15%? Electrical cost = pesos ( 2 decimal places ) B. With the same initial cost, salvage value, expected life, number of working days per year, annual maintenance cost and manufacturing overhead. How much is the fuel cost if the interest rate is 10% compounded annually if motor A needs to be refilled by 2L/ output while motor B requires a 3L/output, and the target output per day is 10 outputs?
PLEASE SHOW GIVEN AND REQUIRED. THANK U Machine A was purchased last year for $20,000 and had an estimated market value of $2000 at the end of its 6-year useful life. Annual operating costs are $2000. The machine will perform satisfactorily over the next 5 years. A salesperson for another company is offering a replacement, Machine B, for $14,000, with a market value of $1,400 after 5 years. Annual operating costs for Machine B will only be $1,400. A trade-in allowance of $10,400 has been offered for Machine A. If the MARR is 12% per year, should you buy the new machine? Use RORAI method. Write a brief interpretation of your answer.
4. Calculate the present worth of a machine which costs $80000 initially and will have a $18000 salvage value after 11 years. The operating cost is $10000 at the end of yearl and amounts increasing by $800 each year. Use an interest rate of 9% per year.
Do the operating costs differ between the defender and challenger? Explain how?
help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working
What is the annual worth for option the cost is $200 and the uniform annual benifit is $55.48 for 5 years. intrest rate is 8%. Answer to be in Two Decimal places.
A surface mining company has determined that it needs an additional haul truck to increase ore production by eliminating the idle time incurred by the loading shovel waiting for a haul truck to arrive. The mining company decided to lease a new $600,000 haul truck for 5 years. If the lease payments are set at $9,000 per month, determine the minimum resale value of the haul truck at the end of the lease period for the leasing company to carn a minimum 12.0% Nominal Annual Rate. Assume monthly compounding and that no other fees are applied