A stamping machine currently has a salvage value of $10 000, and this will drop by 20% per year from now on. Its expected maintenance costs are $1 000 for this year, but in the following year it is expected to need a major overhaul, costing $3 500. In the year following the overhaul, its maintenance costs will be $500, and these will then go up by 30% per year. Your MARR is 10%. There is a challenger available that will do the same job for an EAC of $3 400. When should you replace the old machine? [Enter your response in years]

A stamping machine currently has a salvage value of $10 000, and this will drop by 20% per year from now on. Its expected maintenance costs are $1 000 for this year, but in the following year it is expected to need a major overhaul, costing $3 500. In the year following the overhaul, its maintenance costs will be $500, and these will then go up by 30% per year. Your MARR is 10%. There is a challenger available that will do the same job for an EAC of $3 400. When should you replace the old machine? [Enter your response in years]

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

A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25% CCA rate.) These two new items cost $12,700 and have a useful life of four years, at which time they can be sold for $2,300. The old paint sprayer can be sold now for $570 and could be scrapped for $320 in four years. The entrepreneurial student believes that operating revenues will increase annually by $8,700. The tax rate is 22% and the required rate of return is 15%. What is the NPV of the new equipment?
The Ajax Corporation owns a crane with an estimated remaining life of 10 years. The crane can now be sold for $8,000. If it stays in service it should get a major repair costing $4,000. After the fix, you will have operating and maintenance costs of $3,000 per year. Once repaired, the crane will have a market value of zero at the end of the 10-year study period. A new crane would cost $18,000, last 10 years, and have a market value of $4,000 at the end of that term. The operating and maintenance expenses for this new machine would be $1,000 per year. To evaluate its investment alternatives, the company uses an interest rate of 10% per year before taxes. Should the company replace the old crane?
Solve step by step detailed answer
Veritas Inc. has decided to acquire a new Hydraulic Excavator. It has three options. Caterpillar: purchase cost of $354,055 and operating costs of $28,121 per year (paid at the end of each year). John Deere: purchase cost of $288,413 and operating costs of $21,091 per year (paid at the end of each year). Volvo: purchase cost of $323,238 and operating costs of $15,484 per year (paid at the end of each year). Assume that Geek Inc. has a budget of $335,269 and all excavators have a service life of 13 years. Based on the defender-challenger approach and given that the MARR is 10%, compute the incremental Benefit-Cost ratio of choosing the best excavator (note: round your answer to two decimal places; do not include spaces, dollar signs, or commas). Indicate your recommendation as follows: - answer "0" (without the commas) if your recommendation is the Caterpillar; - answer "1" (without the commas) if your recommendation is the John Deere; - write down as your answer the value of the…
A company decides to automate a process that will require installing a machine that costs BD8,000 and is expected to save BD2,500 per year. If the economic life of the machine is 10 years, at which time it has a salvage value of BD2,000, and if the MARR is 15%, is it a good decision to buy the machine?
A wastewater treatment facility is planning to purchase a new sludge dryer equipment to replace its present unit. The new sludge dryer would cost P135,953 with a five (5) year-life, and no estimated salvage value. Its operating cost would be P150,083 a year. The sludge dryer that they are currently using at present has a book value of P75,566 and a remaining life of 5 years. It has also no estimated salvage value. And its variable operating cost would be cost P187,530 a year. Money is worth 10%. Using ROR method, which is profitable, to buy the new sludge dryer or retain the old equipment? (express your answer in percentage)
A machine costs $19,310 and is expected to have a scrap value of $2,991 whenever it is retired. Operating and Maintenance costs are $1,047 for the first year and expected to increase by $1,751 thereafter. If the MARR is 12%, determine the minimum equivalent uniform annual cost associated with the optimal economic life of the machine. The service life of this machine is 5 years. Note: round your answer to two decimal places, and do not include spaces, currency signs,
An investment of $1,001,000 today yields positive cash flows of $200,000 each year for years 1 through 10. MARR is 15%. Determine the DPBP of this investment. years Round your answer up to the nearest whole number of years. Tolerance is ±1.
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
ABC Electronics must buy a piece of equipment to place electronic components on the printed circuit boards it assembles. The proposed equipment has a 10-year leife with no scrap value. The supplier has given JT several purchase alternatives. The first is to purchase the equipment for $850,000 (Option A). The second is to pay for the equipment in 10 equal installments of $135,000 each, starting one year from now (Option B). The third is to pay $215,000 now and $95,000 at the end of each year for the next 10 years (Option C). Which alternative should JT choose if their MARR is 11% per year? Use an IRR comparison approach. Where JT Electronics must purchase one of the pieces of equipment, do not consider the do nothing option (Perform all calculations using 5 significant figures and round your answer to one decimal place. Also remember that text answers are case-sensitive):. Answers entered using text are case sensitive! Using the defender/challenger approach, what is the Incremental IRR…
The replacement of a planning machine is being considered by the Reardorn Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $32,000 for installation and will have an estimated economic life of 11 years and a $1,800 MV at that time. It is estimated that annual expenses will average $16,000 per year. The defender has a present BV of $6,000 and a present MV of $3500. Data for the defender for the next three years are given below. Using a before-tax interest rate of 12% per year, make a comparison to determine whether it is economical to make the replacement now. MV at End of BV at End of Expenses during Year Year the Year $ - 1,500 $4,500 $18,000 - 2,000 3,000 1 2 22,000 3 - 2,500 1,500 26,000 Click the icon to view the interest and annuity table for discrete compounding when i = 12% per year. Year Fill in the table for the EUAC values for the defender for years 1-3. (Round to the nearest dollar.) Year 1 2 3 EUAC $ $ SA
Chatham Automotive purchased new electric forklifts to move steel automobile parts two years ago. These cost $75 000 each, including the charging stand. In practice, it was found that they did not hold a charge as long as claimed by the manufacturer, so operating costs are very high. This also results in their currently having a salvage value of about $10 000. Chatham is considering replacing them with propane models. The new ones cost $58000. After one year, they have a salvage value of $40 000, and thereafter decline in value at a declining-balance depreciation rate of 20 percent, as does the electric model from this time on. The MARR is 8 percent. Operating costs for the electric model are $20 000 over the first year, rising by 12 percent per year. Operating costs for the propane model will initially be $10 000 over the first year, rising by 12 percent per year. Should Chatham Automotive replace the forklifts now?