sider a situation where a manufacturing company named XYZ owns an 8-year old 3D printer with a present market value of $50,000. The annual operating and maintenance (O&M) costs for this 3D printer amount to $5,000 per year. Meanwhile, a brand-new 3D printer is available for purchase at a cost of $400,000, with O&M costs of $3,000 per year. a) From an outsider's point of view, (opportunity cost approach), what would be the net first cost of keeping the old 3D printer for XYZ company? b) Using an outsider's point of view (opportunity cost approach), what is the net first cost of purchasing the new 3D printer? 3. A construction company named ABC is contemplating the replacement of an outdated crane. The trade-in value of the old crane is currently $30,000, and it incurs annual operating and maintenance (O&M) costs of $250,000. A new crane can be purchased for $700,000 and will have annual O&M costs of $120,000. If the old crane is retained, it will have no salvage value at the end of its remaining life of 10 years. However, the new crane, if purchased, will have a salvage value of $50,000 in 10 years. Determine a) the equivalent uniform annual cost (EUAC) for keeping the old crane, and b) the EUAC for replacing the old crane with the new one. Based on your calculations, should the old crane be replaced? The Minimum Acceptable Rate of Return (MARR) is 10%. Use the cash flow approach (insider's viewpoint approach).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Transcribed Image Text:2. Consider a situation where a manufacturing company named XYZ owns an 8-year old 3D printer with a present market value of $50,000. The annual operating and maintenance (O&M) costs for this 3D printer amount to $5,000 per year. Meanwhile, a brand-new 3D printer is available for purchase at a cost of $400,000, with O&M costs of $3,000 per year. a) From an outsider's point of view, (opportunity cost approach), what would be the net first cost of keeping the old 3D printer for XYZ company? b) Using an outsider's point of view (opportunity cost approach), what is the net first cost of purchasing the new 3D printer? 3. A construction company named ABC is contemplating the replacement of an outdated crane. The trade-in value of the old crane is currently $30,000, and it incurs annual operating and maintenance (O&M) costs of $250,000. A new crane can be purchased for $700,000 and will have annual O&M costs of $120,000. If the old crane is retained, it will have no salvage value at the end of its remaining life of 10 years. However, the new crane, if purchased, will have a salvage value of $50,000 in 10 years. Determine a) the equivalent uniform annual cost (EUAC) for keeping the old crane, and b) the EUAC for replacing the old crane with the new one. Based on your calculations, should the old crane be replaced? The Minimum Acceptable Rate of Return (MARR) is 10%. Use the cash flow approach (insider's viewpoint approach).

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