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How can we determine the economic service life of the asset?
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- PLEASE SHOW GIVEN AND REQUIRED. THANK U Machine A was purchased last year for $20,000 and had an estimated market value of $2000 at the end of its 6-year useful life. Annual operating costs are $2000. The machine will perform satisfactorily over the next 5 years. A salesperson for another company is offering a replacement, Machine B, for $14,000, with a market value of $1,400 after 5 years. Annual operating costs for Machine B will only be $1,400. A trade-in allowance of $10,400 has been offered for Machine A. If the MARR is 12% per year, should you buy the new machine? Use RORAI method. Write a brief interpretation of your answer.NoneDefine replacement analysis
- A 5 year-old tooling kit that was purchased new for $9000 has a current market value of $4000 and expected 0&M costs of $3000, increasing by $1200 per year. Future market values are expected to decline by 25% annually (going forward). The kit can be used for another 3 years at most. The optimal replacement kit costs $8000 and has 0&M costs starting at $2500 per year, increasing by $2000 per year. Salvage value for the new kit at the end of the first year is $4000 and falls by $1000 per year thereafter (until zero). The new model kit will be needed indefinitely. Assume a unique minimum AEC~(15%) for both kits (both the current and replacement kit). The MARR is 15%. 1) What is the AECC• ? a) Less than 6925.70 b) 6925.70-6945.70 c) 6945.70-6965.70 ) d) 6965.70-6985.70 e) More than 6985.70An asset is purchased for P 90,000. Its estimated life is 10 years, after which is will be sold for P 1,000. Using SOYD, Find the book value during the 3rd year.Kermit bought a production line 5 years ago for $35,000. At that time it was estimated to have a service life of 10 years and salvage at the end of its service life of $10,000. Kermit's CFO recently proposed to replace the old line with a modern line expected to last 15 years and cost $95,000. This new line will provide $7,000 savings in annual operating and maintenance costs, and have a salvage value of $15,000 at the end of 15 years. The seller of the new line is willing to accept the old line as a trade-in for its current fair market value, which is $12,000. The CFO estimates that if the old line is kept for 5 more years, its salvage value will be $6,000. We are looking at performing a replacement analysis. The defender must be analyzed using a first cost of and a salvage value of for years. The challenger must be analyzed using a first cost of and a salvage value of for years. Enter the answers as 12345. DO NOT enter $ symbol or comma separators. DO NOT enter decimal places.
- the manager has determined that a potential new product can be sold at a priceof$12.50 each. The cost to produce the product is $7.00, but the equipment necessary for production must be leased for $20,000 per year. What is the break-even point?NoneWe bought a CNC machine 3 years ago for $100,000 with a salvage value of $20,000 after 8 years. It has an annual operating cost of $30,000. A new machine is available at a price of $120,000, a life of 10 years and a salvage value of $30,000. The annual operating cost for this machine is $15,000. The market value for the CNC machine is $70,000 now. At MARR= 10% per year should we keep the CNC machine or replace it?
- The first cost of an equipment is 65000 and a salvage value of 3000 at the end of its 6 year life. find the book value after 3 years using the sum of the years method.2. One year ago, a machine was purchased at a cost of $2,000, to be used for 6 years.However, the machine has failed to perform properly and has a cost of $500 per year forrepairs, adjustments, and shutdowns. A new machine is available to accomplish thefunctions desired and has an initial cost of $3,500. Its maintenance costs are expected tobe $50 per year during its service of 5 years. The approximate market value of the presentmachine has been roughly $1,200. If the operating cost (other than maintenance) for bothmachines are equal, show whether it is economical to purchase the new machine. Performa before-tax study, using an interest rate of 12% and assume that the salvage values will benegligible.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%
