Digital Tech Dynamics purchased a new quality inspection system for $550,000. The estimated salvage value was $50,000 after 10years. Currently, the expected remaining life is 7 years with an AOC of $45,000 per year and an estimated salvage value of $40,000.The new president has recommended early replacement of the system with one that costs $450,000 and has a 12-year economicservice life, a $35,000 salvage value, and an estimated AOC of $50,000 per year. If the MARR for the corporation is 12% per year, usefactor-based relations to determine the minimum trade-in value necessary now to make the president's replacement economicallyadvantageous.The minimum trade-in value necessary now to make the president's replacement economically advantageous is $

The objective of this question is to determine the minimum trade-in value necessary now to make the…

Answered: Digital Tech Dynamics purchased a new…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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one factory manager bought a rare machine for $10 million. It is estimated that the sales value of the machine at the end of the first year will be $3 million and the machine will be worth $500,000 due to the demand by the antique dealers. The maintenance cost is expected to be $300,000 in the first 3 years and double each year thereafter. In this way, the maintenance cost of the 4th year is $600,000, the maintenance cost of the 5th year is $1,200,000, etc. Calculate the economic life of this machine based on a 15% MCVO. A) 7 B) 3 C)12 D) 6 E) 9
A piece of equipment has a first cost of $150,000, a maximum useful life of 7 years, and a market (salvage) value described by the relation S = 120,000 – 17,000k, where k is the number of years since it was purchased. The salvage value cannot go below zero. The AOC series is estimated using AOC = 60,000 + 7,000k. The interest rate is 14% per year. Determine the economic service life and the respective AW. The economic service life is ...... year(s) and the AW value is ........
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A granary has two options for a conveyor used in the manufacture of grain for transporting, filling, or emptying. One conveyor can be purchased and installed for $45,000 with $3,500 salvage value after 16 years. The other can be purchased and installed for $95,000 with $3,000 salvage value after 16 years. Operation and maintenance for each is expected to be $21,500 and $14,000 per year, respectively. The granary uses MACRS-GDS depreciation, has a marginal tax rate of 40%, and has a MARR of 9% after taxes. Click here to access the TVM Factor Table Calculator Click here to access the MACRS-GDS table. Determine which alternative is less costly, based upon comparison of after-tax annual worth. Show the AW values used to make your decision: Conveyor 1: $ Conveyor 2: $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±10. What must the cost of the second (more expensive) conveyor be for there to be no economic…
Digital Tech Dynamics purchased a new quality inspection system for $550,000. The estimated salvage value was $50,000 after 10 years. Currently, the expected remaining life is 7 years with an AOC of $67,500 per year and an estimated salvage value of $40,000. The new president has recommended early replacement of the system with one that costs $430,000 and has a 12-year economic service life, a $35,000 salvage value, and an estimated AOC of $50,000 per year. If the MARR for the corporation is 12% per year, use factor-based relations to determine the minimum trade-in value necessary now to make the president's replacement economically advantageous. The minimum trade-in value necessary now to make the president's replacement economically advantageous is $[
A machine purchased 3 years ago for $140,000 is now too slow to satisfy the demand of the customers. It can be upgraded now for $86,000 or sold to a smaller company internationally for $47,000. The upgraded machine will have an annual operating cost of $92,000 per year and a $37,000 salvage value in 3 years. If upgraded, the presently owned machine will be retained for only 3 more years, then replaced with a machine to be used in the manufacture of several other product lines. The replacement machine, which will serve the company now and for a maximum of 8 years, costs $222,000. Its salvage value will be $57,000 for years 1 through 5; $20,000 after 6 years; and $10,000 thereafter. It will have an estimated operating cost of $45,000 per year. Perform an economic analysis at 9% per year using a specified 3-year planning horizon. a) Determine if the current machine should be replaced now or 3 years from now. b) Once decided, determine the equivalent AW for the next three years. a) The…
Digital Tech Dynamics purchased a new quality inspection system for $550,000. The estimated salvage value was $50,000 after 10 years. Currently, the expected remaining life is 7 years with an AOC of $27,500 per year and an estimated salvage value of $40,000. The new president has recommended early replacement of the system with one that costs $380,000 and has a 12-year economic service life, a $35,000 salvage value, and an estimated AOC of $50,000 per year. If the MARR for the corporation is 12% per year, use factor-based relations to determine the minimum trade-in value necessary now to make the president's replacement economically advantageous The minimum trade-in value necessary now to make the president's replacement economically advantageous is $[
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Searching for ways to cut costs and increase profit, one of the industrial engineers at Home Comfort Furniture Manufacturers, Inc. determined that the equivalent annual worth of an existing machine over its remaining useful life of 2 years is $-74,000 per year. The IE also determined that used machines like the one currently in use are not available any longer, but the defender can be replaced with a challenger that is more advanced. It will have an AW of $-77,550 if it is kept for 2 years or less, $-71,575 if it is kept between 3 and 4 years, and $-65,000 if it is kept for 5 to 10 years. If the company uses a specified 3-year planning horizon and an interest rate of 9% per year. a) Determine when the company should replace the machine. b) Determine the AW for the next 3 years. a) The company should (Click to select) b) The AW for the next 3 years is $
A packaging company is planning to replace its existing material handling system (MHS). The MHS that it now owns cost $135000 when purchased 7 years ago and was estimated to have 12 year useful life with a $3000 salvage value at the end of that time. Currently, the MHS has a net market value of $40000 and if it is not sold, it is expected to have operating costs of $24000 per year. A new MHS can be purchase for $85000. This new system is expected to have operating costs of $17000, an economic life of 7 years, and a salvage value of $10000 at the end of that time. For depreciation purposes, assume that the straight line method has been used, and the current MHS and new MHS are 10 year and 5 year recovery property, respectively. If the effective tax rate is 50%, which alternative should be selected in the case of a before tax MARR of 20% and an after tax MARR of 10%

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