A used cleaning vehicle will cost $85,000 and have a $20,000 salvage value at the end of its five year life. A new system with advanced features will cost $150,000 and have $40,000 market value at the end of its five year life. The new system is expected to reduce labor hours compared with the used system. Current street-cleaning activity requires the used system to operate 8 hours per day for 20 days per month. Labor costs $50 per hour (including fringe benefits), and MARR is 12% per year. a. Find the breakeven percent reduction in labor hours for the new system. b. If the new system is expected to be able to reduce labor hours by 17% compared with the used system, which machine should the city purchase? c. Investigate how sensitive the decision is to 1) changes in the market value of the new system and 2) the productivity improvomont of tho pow evstom Graph vvOur rosulte Hint: Think incrom ontallyl

A used cleaning vehicle will cost $85,000 and have a $20,000 salvage value at the end of its five year life. A new system with advanced features will cost $150,000 and have $40,000 market value at the end of its five year life. The new system is expected to reduce labor hours compared with the used system. Current street-cleaning activity requires the used system to operate 8 hours per day for 20 days per month. Labor costs $50 per hour (including fringe benefits), and MARR is 12% per year. a. Find the breakeven percent reduction in labor hours for the new system. b. If the new system is expected to be able to reduce labor hours by 17% compared with the used system, which machine should the city purchase? c. Investigate how sensitive the decision is to 1) changes in the market value of the new system and 2) the productivity improvomont of tho pow evstom Graph vvOur rosulte Hint: Think incrom ontallyl

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 machine was bought three years ago for $200,000 with the expected life of 8 years and a salvage value of $20,000. It now can be sold for $100,000. The annual operating cost for this machine over the next five years will be $30,000. A new machine can be purchased for $250,000, a salvage value of $20,000, expected life-of 10 years, and an annual operating cost of $20,000. Should we replace the old machine? MARR= 10%
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Part a.) An engineer with Calahan Technologies calculated the AW of cost values shown for a presently owned machine using estimates she obtained from the vendor and company records. A challenger has an economic service life of 7 years with an AW of $-86,000 per year. Assume that all future costs remain as estimated and the challenger's technology will definitely replace that of the defender within 5 years. When should the company purchase the challenger? Retention Period, Years AW of Costs, $ per Year -92,000 2 -81,000 -87,000 4 -89,000 5 -95,000 Part b.) The costs and revenue projections for a new product made on the machine from Part a.) are estimated below. What is the estimated profit at a production rate of 25% above breakeven? Fixed cost = $592,000 per year Production cost per unit = $198 Revenue per unit = $330
What is the total lifetime cost of the system given the following information? The initial cost of the system is $4800. The system has annual maintenance costs of $175. On the fourth year, an overhaul cost of $350 is scheduled. The system is expected to last for 5 years. The discount rate is 8%. Answer to the nearest dollar $________.00.
Because it fumes at room temperatures, hydrochloric acid creates a very corrosive work environment. A machine working in that environment is deteriorating quickly and can be used for only one more year, at which time it will be scrapped with no salvage value. It was purchased 3 years ago for $88,000, and its operating cost for the next year is expected to be $49,000. A more corrosion-resistant challenger will cost $206,000 with an operating cost of $46,000 per year. It is expected to have a $50,000 salvage value after its 10-year ESL. At an interest rate of 8% per year, what minimum replacement value would render the challenger attractive? The minimum replacement value that would render the challenger attractive is $ .
Suppose that two certain cars have the following average operating and ownership costs. Average Costs per Mile Ownership Operating $0.24 $0.20 $0.68 $0.25 If you drive 20,000 miles per year, by how much does the total annual expense for Car A exceed that of Car B over nine years? Car A Car B The total annual expense for Car A exceeds that of Car B by $ (Round to the nearest dollar as needed.) over nine years. Total $0.92 $0.45