Required Information Nuclear safety devices installed several years ago have been depreciated from a first cost of $200,000 to zero using the Modified Accelerated Cost Recovery System (MACRS). The devices can be sold on the used equipment market for an estimated $15,000, or they can be retained in service for 5 more years with a $9000 upgrade now and an operating expenses (OE) of $6000 per year. The upgrade investment will be depreciated over 3 years with no salvage value. The challenger is a replacement with newer technology at a first cost of $40,000, n=5 years, and S= 0. The new units will have operating expenses of $7000 per year. Use a 5-year study period, an effective tax rate of 44%, an after-tax minimum acceptable rate of return (MARR) of 13% per year, and an assumption of classical straight line depreciation (no half-year convention) to perform an after-tax AW-based replacement study. The annual worth of the defender is determined to be $ 19095 The annual worth of the challenger is determined to be $ Since the annual worth of the defender is smaller, it is retained.

Required Information Nuclear safety devices installed several years ago have been depreciated from a first cost of $200,000 to zero using the Modified Accelerated Cost Recovery System (MACRS). The devices can be sold on the used equipment market for an estimated $15,000, or they can be retained in service for 5 more years with a $9000 upgrade now and an operating expenses (OE) of $6000 per year. The upgrade investment will be depreciated over 3 years with no salvage value. The challenger is a replacement with newer technology at a first cost of $40,000, n=5 years, and S= 0. The new units will have operating expenses of $7000 per year. Use a 5-year study period, an effective tax rate of 44%, an after-tax minimum acceptable rate of return (MARR) of 13% per year, and an assumption of classical straight line depreciation (no half-year convention) to perform an after-tax AW-based replacement study. The annual worth of the defender is determined to be $ 19095 The annual worth of the challenger is determined to be $ Since the annual worth of the defender is smaller, it is retained.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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This is engineering economics subject.
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