Answered: Absorption Compression Chilling (AC)…

Absorption Compression Chilling (AC) Chilling (CC) Сapital investment $60,000 $80,000 Annual operating expenses 40,000 32,000 Salvage (market) value 10,000 Useful life 6 уears 9 years

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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You are considering relocating your outdoor-equipment manufacturing plant and have narrowed your choices to four possible locations based on the availability of high quality labor, rail transportation, and an adequate distribution network. Based on the following costs and benefits associated with each location, use incremental analysis and IRR to choose the most cost-effective location assuming MARR = 15%. Initial cost (Year 0) Annual operations and maintenance costs (Years 1 thru 5) Annual gross benefits (Years 1 thru 5) Upload Choose a File Question 6 Portland, OR Bend, OR Boise, ID $700,000 $800,000 $600,000 500,000 800,000 Seattle, WA $1,000,000 1,000,000 400,000 1,100,000 You consider purchasing a new piece of equipment (7yr MACRS property) f 1,375,000 625,000 1,500,000 sod POLE 1-10 1
A piece of new equipment has been proposed by engineers to increase the productivity of a certain manual welding operation. The investment cost is $25,000, and the equipment will have a market value of $5,000 at the end of a study period of five years. Increased productivity attributable to the equipment will amount to $8,000 per year after extra operating costs have been subtracted from the revenue generated by the additional production. Evaluate the IRR of the proposed equipment. Is the investment a good one? Recall that the MARR is 20% per year.
A large city in the midwest needs to acquire a street-cleanıng machine to keep its roads looking nice year round A used cleaning vehicle will cost $75,000 and have a $20,000 market (salvage) value at the end of its five-year Iife. A new system with advanced features will cost $150,000 and have a $50,000 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 $40 per hour (including fringe benefits), and MARR is 12% per year compounded monthly 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 20% compared with the used system, which machine should the city purchase? a. The breakeven reduction in lebor hours for the new system is ________% (Round to one decimal place)
Consider VM * D' * s recent investment in the 3D MRI equipment. While this technology allows the Medical Imagining Center to stay at the forefront of technological developments in the field, it is currently underutilized. How would you propose to treat the new equipment from a costing system standpoint? Let's assume that the operating data of the new 3D MRI machine is the following: Initial Cost = $5, 000, 000 Useful life = 10 years Residual value = 0 Overhead costs (other than depreciation) per year =\$ 250000 Capacity = 2,500 hours / year Current utilization = 500 hours / year
New Economy Transport (B) There is no question that the Vital Spark needs an overhaul soon. However, Mr. Handy feels it unwise to proceed without also considering the purchase of a new vessel. Cohn and Doyle Inc., a Wisconsin shipyard, has approached NETCO with a design incorporating a Kort nozzle, extensively automated navigation and power control systems, and much more comfortable accommodations for the crew. Estimated annual operating costs of the new vessel are: Fuel Labor and benefits. Maintenance Other $380,000 330,000 70,000 105,000 $885,000 Page 183 The crew would require additional training to handle the new vessel's more complex and sophisticated equipment. Training would. probably cost $50,000 next year. The estimated operating costs for the new vessel assume that it would be operated in the same way as the Vital Spark. However, the new vessel should be able to handle a larger load on some routes, which could generate additional revenues, net of additional out- of-pocket…
An electronic circuit board manufacturer is considering six mutually exclusive cost-reduction projects for its PC-board manufacturing plant. All have lives of 10 years and zero salvage value. The required investment, the estimated after-tax reduction in annual disbursements, and the gross rate of return arc given for each alternative in the following table: llte rate of return on incremental investments is given for each project as follows: Which project would you select according to the rate of return on incremental investment if it is stated that the MARR is 15%?
In trying to decide whether or not to replace a sorting/baling machine in a solid waste recycling operation, an engineer calculated the annual worthvalues for the in-place machine and a challenger. On the basis of these costs, the defender should be replaced:a. now.b. 1 year from now.c. 2 years from now.d. 3 years from now.
Advanced Modular Technology (AMT) makes energy cleaner, safer, more secure and more efficient. It typically exhibits net annual revenues that increase over a fairly long period. In the long run, an AMT project may be profitable as measured by IRR, but its simple payback period may be unacceptable Evaluate this AMT project using the IRR method when the company MARR is 26% per year and its maximum alowable payback period is three years. What is your recommendation? Capital investment at time 0 Net revenues in year k $99.000 $21.000 + Market (salvage) value Life $0,000 - (-1) $9,000 7 years The internal rate of return is%. (Round to one decimal place.)
A pork processing facility is considering the installation of either a storage facility or a holding pond. A biosystems engineer has been hired to evaluate the economic trade-offs for the two alternatives. The engineer estimates the cost of the storage facility to be $213,000, with annual costs for maintenance to be $3,200 per year. She estimates the cost of the pond to be $90,000, plus $45,000 for pumps and piping, and annual operating and maintenance costs for the holding pond are estimated to be $8,500. The engineer estimates the life of the storage facility and the pond to be around 20 years but is concerned about the accuracy of this estimate. She decides to do a sensitivity analysis. Solve, a. Develop the equation that she would use to determine how sensitive the economic decision is to changes in life. Use a MARR of 15%. b. Determine which alternative is preferred for lives ranging from 15 to 25 years.
A pipeline engineer working in Kuwait for the oil giant BP wants to perform a present worth analysis on alternative pipeline routings—the first predominately by land and the second primarily undersea. The undersea route is more expensive initially due to extra corrosion protection and installation costs, but cheaper security and maintenance reduces annual costs. Use Present Worth Analysis with a MARR = 10% to determine which route should be selected.
A consulting engineer is considering two methods for lining landfill for municipal solid waste management in Bannock County, Idaho. A geosynthetic bentonite clay liner (GCL) will cost $2.0 million to install, and if it is renovated after 4 years at a cost of $400,000, its life can be extended another 2 years. Alternatively, a high-density polyethylene (HDPE) geomembrane can be installed that will have a useful life of 12 years. At an interest rate of 6% per year, how much money can be spent on the HDPE liner for the two methods to break even?
Oil from a particular type of marine microalgae can be converted to biodiesel that can serve as an alternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae, the construction cost will be $13 million and the maintenance & operating (M&O) cost will be $2.1 million per year. If long plastic tubes are used for growing the algae, the initial cost will be higher at $18 million, but less contamination will render the M&O cost lower at $0.41 million per year. At an interest rate of 10% per year and a 5-year project period, which system is better, ponds or tubes? Use a present worth analysis.