A new equipment is being considered at a local company at a cost of $200,000. The operation and maintenance costs of this equipment are estimated to be about $20,000 per year. Salvage value is expected to be $40,000 at the end of its useful life. The life of this equipment is estimated to vary anywhere from 5 to 9 years with the associated probabilities as shown in the table below. If an interest rate of 10% is used, what is the expected EUAC for this equipment? Life, Years 5 6 7 8 9 Probability 0.3 0.1 0.15 0.2 0.25 $66,460 $55,970 $62,960 $58,206.2

Financial information about graders planned to be purchased is presented in the table below. Calculate the net present values of the machines with the least common multiple (LCM) approach. Choose the economically most suitable grader. MARR is specified as 16%. Purchase costs (TL) Annual repair-maintenance cost (TL) Major repair-maintenance (TL) Annual income (TL) Salvage value (end of 4th year) (TL) Economic life (years) Machine A 220.000+ 12.500*X 5.000 15.000 (at 3rd year) 110.000+ 2.000*Y 50.000 4 Machine B 300.000 + 14.500*Y 3.500 12.000 (at 3rd year) 140.000 + 1.200*X 70.000 6

Eddie’s Precision Machine Shop is insured for $700,000. The present yearly insurance premium is $1.00 per $100 of coverage. A sprinkler system with an estimated life of 20 years and no salvage value can be installed for $20,000. Annual maintenance costs for the sprinkler system are $400. Ifthe sprinkler system is installed, the system must be included in the shop’svalue for insurance purposes but the insurance premium will reduce to $0.40 per $100 of coverage. Eddie uses a MARR of 15%/yr. Solve, a. What is the internal rate of return of this investment? b. What is the decision rule for judging the attractiveness of investments based on internal rate of return? c. Is the sprinkler system economically justified?

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Compute the annual equivalent repair cost over a 5 year life if a typewriter is warranted for 2 years and has estimated repair cost of $1000 annually. Use i = 10%. Shoe your solution.

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AN INDUSTRIAL PLANT IS CONSIDERING THE PURCHASE OF A CENTRIFUGAL PUMP. THREE OFFERS WERERECEIVED AND BASIS OF SELECTION HAVE BEEN TABULATED AS FOLLOWS: OFFER A OFFER B OFFER CPRICE OF PUMP P 60,000.00 P 96,000.00 P 120,000.00ECONIMIC LIFE (YEARS) 3 5 10SALVAGE VALUE @ END OF ECONOMIC LIFE P 5,000.00 P 10,000.00 P 8,000.00YEARLY MAINTENANCE COST 10,000.00 6,000.00 5,000.00IF COST OF MONEY IS 14%, WHAT OFFER WOULD YOU RECOMMEND TO BE PURCHASED? USE ROR METHOD.

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Assume that you are considering to buy a Toyota Corolla automoble. You need to select one of the Diesel and Gasoline option. The related information is given in the following table. The car will be used for 5 years and then it wll be sold. What is the annual average distance that makes Diesel and Gasollne option equivalent (i=10%). Diesel Gasoline Price (TL) Insurance (TL/year) Fuel cost (Lt/TL) 94000 78000 700 700 4.44 5.16 Fuel consumption (Lt/km) Salvage value after 5 years (TL) 0.042 0.058 70000 58000 Select one: a. 17000 O b. 7000 O c. 27000 O d. 37000 e. 12000 f. 19992

CB Electronix must buy a piece of equipment to place electronic components on the printed circuit boards it assembles. The proposed equipment has a 10-year life with no scrap value. The supplier has given CB several purchase alternatives. The first is to purchase the equipment for $950,000. The second is to pay for the equipment in 10 equal installments of $125,000 each, starting one year from now. The third is to pay $210,000 now and S85,000 at the end of each year for the next 10 years. Complete parts (a) and (b) below. a. Which alternative should CB choose if its MARR is 11 percent per year? Use an IRR comparison approach. Considering the alternatives in the order of lowest first cost, the best option is the which has an incremental rate of return of %. (Type an integer or decimal rounded to two decimal places as needed. Use an approximate ERR if the IRR cannot be used.)