The replacement of a planing machine is being considered by the Reardorn Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $30,000 for installation and will have an estimated economic life of 12 years and a $2,000 MV at that time. It is estimated that annual expenses will average $16,000 per year. The defender has a present BV of $6,000 and a present MV of $4,000. Data for the defender for the next three years are as follows: BV at End of Year MV at Expenses during the End of Year Year Year $3,000 2,500 2,000 $4,500 3,000 $20,000 25,000 30.000 2 1.500

The replacement of a planing machine is being considered by the Reardorn Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $30,000 for installation and will have an estimated economic life of 12 years and a $2,000 MV at that time. It is estimated that annual expenses will average $16,000 per year. The defender has a present BV of $6,000 and a present MV of $4,000. Data for the defender for the next three years are as follows: BV at End of Year MV at Expenses during the End of Year Year Year $3,000 2,500 2,000 $4,500 3,000 $20,000 25,000 30.000 2 1.500

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: The AW values for retaining a presently owned machine for additional years are shown in the table.…

A: Introduction: A decent rate of return is called the Minimum Attractive Rate of Return (MARR), and it…

Q: A4-5 A production facility is currently utilizing carbon steel tubing. The current process will…

A: Present Worth Analysis, also known as Net Present Value (NPV) analysis, is a financial technique…

Q: high-speed commercial centrifuge has the following net cash flows and abandonment values over its…

A: When a company or firm thinks about whether a project is worth the costs that will be incurred in…

Q: "A new delivery truck is available for $215,000. O&M costs are $20,000 each year for the first five…

A: Economic service life, also known as useful life refers to the period during which an asset remains…

Q: A used cleaning vehicle will cost $85,000 and have a $20,000 salvage value at the end of its five…

A: There are two alternatives available First the used system and another is the new system Present…

Q: A company with a MARR of 10% must install one of two production machines. The economic parameters of…

A: Machine X Y Initial cost ($) $15,000 $22,000 Service life (years) 4 years 6…

Q: The table below contains the calculated annual equivalent cost for a defender and a challenger based…

A: The economic life of an asset is the period during which it is expected to be economically useful to…

Q: Machine J has a first cost of $50,000, an estimated service period of 12 years, and an estimated…

A: In finance and economics, present worth, also known as present discounted value, refers to the…

Q: The Sound and truck company is considering a replacement of a sintered plant with one with better…

A: To analyze the replacement decision for the sintering machine, we need to calculate the present…

Q: A steel construction company has one unit of production machinery purchased 5 years ago at a price…

A: NPV stands for Net Present Value. It is a financial metric used to evaluate the profitability or…

Q: machine and a manual feed machine for a finishing process. The auto feed machine has an initial cost…

A: Breakeven point is the point where firm only cover their variable cost of the production it means…

Q: Sooky has a spotter truck with a book value of $43,000 and a remaining useful life of five years. At…

A: The purchase price of the new spotter truck is $123,000.The trade-in value of the old spotter truck…

Q: From the data shown, determine the economic service lives of the defender and challenger. (Note:…

A: In this case, the annual worth a value of defender and challenger is compared with each years of and…

Q: A company is deciding whether to keep its presently owned vehicle for business purposes or purchase…

A: Given that, Cost of new car =$55,000Maintenance cost =$1400Salvage value =41% of the original…

Q: K An old forklift is due for a replacement analysis. It has a current market value $10,000. The…

A: The marginal cost means to the rise in production costs generated by the production of extra product…

Q: MARR = 12%. This asset is similar across some other asset replacement questions: An asset has a…

A: Given MARR= 12%initial cost = 90,000expected loss each year is 5000O and M=0Repair for 3rd…

Q: A machine was installed 5 years ago. Its market value is now $15,000 and is expected to decline by…

A: Here's a detailed calculation for better understanding. Step 1: Calculate the EAC for the…

Q: Company X is looking to expand their operations to add a second product line capable of producing…

A: Given information Sales units Year 1 2 3 4…

Q: Which of the following statements is CORRECT about replacement analysis where service lives of…

A: Replacement analysis is referred to the application of equivalent uniform annual cost and annual…

Q: A machine that cost $120,000 3 years ago can be sold now for $51,500. Its market value is expected…

A: Annual worth shows the costs and benefits in terms of cash for a good, asset or investment over the…

Q: The Ajax Corporation owns a crane with an estimated remaining life of 10 years. The crane can now be…

A: For comparing the two investments , we will need to do the present value analysis of both the…

Q: A company is evaluating the addition of equipment to its present operations. They need to purchase…

A: Current market value = $160,000 Gross revenue = $30,000 Maintenance cost = $5,000 Life = 4Years…

Question

The replacement of a planing machine is being considered by the Reardorn Furniture Company. (There is an
indefinite future need for this type of machine.) The best challenger will cost $30,000 for installation and will have an
estimated economic life of 12 years and a $2,000 MV at that time. It is estimated that annual expenses will average
$16,000 per year. The defender has a present BV of $6,000 and a present MV of $4,000. Data for the defender for
the next three years are as follows:
MV at
End of
BV at
End of
Expenses
during the
Year
Year
Year
Year
$3,000
2,500
$4,500
3,000
1,500
$20,000
25,000
30,000
1
2
3
2,000
Using a before-tax interest rate of 15% per year, make a comparison to determine whether it is economical to
make the replacement now.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

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 $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 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 $
DBS Builders Pte Ltd purchased an asphalt paver eight years ago for $280,000. The estimated operation and maintenance (O&M) costs for the next three years are $56,000, $68,000, and $82,000, respectively. The asphalt paver can be sold for $65,000 now, for $57,000 next year, for $45,000 two years from now, and for $28,000 three years from now. 4. The latest asphalt paver in the market costs $290,000 and has an estimated service life of five years. The salvage value is estimated to be $50,000 after five years. The expected annual O&M costs will be $6,000 for the first year and increase by $3,800 per year thereafter. If a before-tax minimum attractive rate of return (MARR) of 12% is estimated, what replacement decision should DBS Builders make?
2
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 $[
A stamping machine currently has a salvage value of $10 000, and this will drop by 20% per year from now on. Its expected maintenance costs are $1 000 for this year, but in the following year it is expected to need a major overhaul, costing $3 500. In the year following the overhaul, its maintenance costs will be $500, and these will then go up by 30% per year. Your MARR is 10%. There is a challenger available that will do the same job for an EAC of $3 400. When should you replace the old machine? [Enter your response in years]
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 $
The replacement of a planning machine is being considered by the Reardorn Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $32,000 for installation and will have an estimated economic life of 11 years and a $1,800 MV at that time. It is estimated that annual expenses will average $16,000 per year. The defender has a present BV of $6,000 and a present MV of $3500. Data for the defender for the next three years are given below. Using a before-tax interest rate of 12% per year, make a comparison to determine whether it is economical to make the replacement now. MV at End of BV at End of Expenses during Year Year the Year $ - 1,500 $4,500 $18,000 - 2,000 3,000 1 2 22,000 3 - 2,500 1,500 26,000 Click the icon to view the interest and annuity table for discrete compounding when i = 12% per year. Year Fill in the table for the EUAC values for the defender for years 1-3. (Round to the nearest dollar.) Year 1 2 3 EUAC $ $ SA
A hospital in NYC area bought a diagnostic machine at a cost of $40,000. Maintenance cost is expected to remain constant throughout the life of this machine at $2,000 per year. The salvage value is estimated to be “0” at the end of the useful life of 10 years. Determine the economic life of this machine. MARR = 10% A. 5 years B. 1 year C. 10 years D. 7 years