Problem 6-23 Equivalent Annual CostSheep Ranch Golf Academy is evaluating new golf practice equipment. The "Dimple-Max" equipment costs $125,000, has a 6-year life, and costs $9,600 per year to operate.The relevant discount rate is 9 percent. Assume that the straight-line depreciationmethod is used and that the equipment is fully depreciated to zero. Furthermore,assume the equipment has a salvage value of $9,300 at the end of the project's life. Therelevant tax rate is 24 percent. All cash flows occur at the end of the year. What is theequivalent annual cost (EAC) of this equipment? (A negative amount should beIndicated by a minus sign. Do not round Intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)Answer is complete but not entirely correct.29,221.50 XEAC$

Equivalent annual cost refers to the cost incurred for owning, operating, and the maintenance of an…

Answered: Problem 6-23 Equivalent Annual Cost…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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#24 * Using NPW to Decide Between Competing Projects: Machine X has an initial cost of $12,000 and annual maintenance of $700 per year. It has a useful life of four years and no salvage value at the end of that time. Machine Y costs $22,000 initially and has no maintenance costs during the first year. Maintenance is $200 at the end of the second year and increases by $200 per year thereafter. Machine Y has a useful life of eight years and an anticipated salvage value of $5,000 at the end of its useful life. If the MARR is 6%, what is the approximate Net Present Worth (NPW) of machine Y? A. -$33,015 B. -$23,781 C. -$22,831 D. -$19,365
D-76 A new chemical remediation tank is needed. C'urrent lechnology tanks, which cost $150,000, musI Ie drained and treated every 2 years at a cost of $30,000; the tanks will last 10 years, and ench will have a salvage value of 5% of first cost. A tank with new technology has just come on the market. T'hore are no periodic maintenance costs, and a tank will last 20 years. If the new tanks cost $325,000, what minimum salvage value, as a percentage of lirst cont, would be required for this technology to be a betler option? Use a 12% interest rate. (a) 10% (b) 36% (c) 57% (d) 72%
5
Accessibility: Unavailable QUESTION 6 Simple Rate of Return Method The management of Stillford Micro Brew is considering the purchase of an automated bottling machine for $80,000. The machine would replace an old piece of equipment that costs $33,000 per year to operate. The new machine would cost $10,000 per year to operate. The old machine currently in use could be sold now for a scrap value of $5,000. The new machine would have a useful life of 10 years with no salvage value. Required: Compute the simple rate of return on the new automated bottling machine. 2
H5. SGS Golf Academy is evaluating different golf practice equipment. The "Dimple-Max" equipment costs $140,000, has a 4-year life, and costs $9,200 per year to operate. The relevant discount rate is 13 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $21,000 at the end of the project’s life. The relevant tax rate is 21 percent. All cash flows occur at the end of the year. What is the EAC of this equipment? (Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Just solve d
Problem 9 A contractor is considering the following three alternatives: a. Purchase a new microcomputer system for $15,000. The system is expected to last 6 years with salvage value of $1,000. b. Lease a new microcomputer system for $3,000 per year, payable in advance. The system should last 6 years. c. Purchase a used microcomputer system for $8,200. It is expected to last 3 with no salvage value. Use a common-multiple-of-lives approach. If MARR of 8% is used, which alternative should be selected using a discounted present worth analysis? If the MARR is 12%, which alternate should be selected? years
Question 2 Two possible routes for a power line are under study. Data on the routes are as shown in the following table: Option Information Length First Cost Maintenance cost Useful Life (years) Salvage Value Yearly power loss Annual Taxes Around the Lake Under the Lake 15 km 5 km $25,000 /km $400/km/yr $5000 / km $200/km/yr 15 20 $3000/km S5000/km S500/km |2% of the first cost 2% of the first cost S500/km If MARR = 10%, which alternative should you select? Justify your answer. (
9
Example#19 SW# 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 (salvage) value of $5,000 at the end of its expected life 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 value of the additional production. Suppose that E=MARR= 20% per year. Wha is the project's ERR, and is the project acceptable? Create a Cashflow diagram. IND
Question 5 A machine that have the following cost is under consideration for a new manufacturing process. The interest rate is 6% compounded semiannually. First cost = $70,000 Semiannual operating cost = 6,000 Semiannual income = 18,000 Salvage value = 9,000 Life in years = 5 years a. PW = $29,059 b. PW = $39,059 O c. PW = -$39,059 d. PW = $19,059

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