You and your partner have become very interested in cross-country motorcycle racing and wish to purchase entry-level equipment.You have identified two alternative sets of equipment and gear. Package K has a first cost of $130000, an operating cost of$5500 per quarter, and a salvage value of $60000 after its 2-year life. Package L has a first cost of $190000 with a lower operatingcost of $2300 per quarter and an estimated $13000 salvage value after its 4-year life. Which package offers the lower present worthanalysis at an interest rate of 12.00% per year, compounded quarterly? (Include a minus sign if necessary.)The present worth of package K is $ 121243.75| and that of package L is $ -210243.75Package L offers the lower present worth.

For Package K:First cost = $130,000 Operating cost = $5,500 per quarter Salvage value = $60,000…

Answered: You and your partner have become very…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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An electric switch manufacturing company is trying to decide between three different assembly methods. Method A has an estimated first cost of $40,000, an annual operating cost (AOC) of $9000, and a service life of 2 years. Method B will cost $80,000 to buy and will have an AOC of $6000 over its 4-year service life. Method C costs $130,000 initially with an AOC of $4000 over its 8-year life. Methods A and B will have no salvage value, but Method C will have equipment worth 10% of its first cost. Perform both (a) future worth, and (b) present worth analyses to select the method at i = 10% per year.
You and your partner have become very interested in cross-country motorcycle racing and wish to purchase entry-level equipment. You have identified two alternative sets of equipment and gear. Package K has a first cost of $160,000, an operating cost of $7000 per quarter, and a salvage value of $40,000 after its 2-year life. Package L has a first cost of $210,000 with a lower operating cost of $5000 per quarter, and an estimated $26,000 salvage value after its 4-year life. Which package offers the lower present worth analysis at an interest rate of 8% per year, compounded quarterly?
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You and your partner have become very interested in cross-country motorcycle racing and wish to purchase entry-level equipment. You have identified two alternative sets of equipment and gear. Package K has a first cost of $170,000, an operating cost of $6,000 per quarter, and a salvage value of $50,000 after its 2-year life. Package L has a first cost of $260,000 with a lower operating cost of $3,400 per quarter and an estimated $22,000 salvage value after its 4-year life. Which package offers the lower present worth analysis at an interest rate of 12% per year, compounded quarterly? The present worth of package K is $ 78042.49 and that of package L is $ Package L v offers the lower present worth.
A machine used to shread cardboard boxes for composting has a first cost of $10,000, an AOC of $7000 per year, a 3-year life, and no appreciable salvage value. Assume you were told that the service provided by the machine will be needed for only 5 years, which entails a repurchase and retention for only 2 years.What salvage value, S, is required after 2 years in order to make the 2-year AW value the same as it is for its 3-year life cycle AW? Assume i = 10% per year. Solve using factors and, if assigned, using a spreadsheet and Goal Seek.
A company plans to purchase new cut-and-finish equipment. Two manufacturers offered the estimates as following: Vendor A has a first cost of $15,000, an annual operating cost of $3,500, a salvage value of $1000, and a service life of 6 years. Vendor B has a first cost of $18,000, an annual operating cost of $3,100, a salvage value of $2,000, and a service life of 9 years. If a study period of 5 years is used and the salvage values are not expected to change, which vendor should be selected? -$26,236, A -$26,636, A -$25,336, A -$24,666, B
The Ecology Group wishes to purchase a piece of equipment for recycling of various metals. Machine 1 costs $123,000, has a life of 10 years, an annual cost of $5000, and requires one operator at a cost of $24 per hour. It can process 10 tons per hour. Machine 2 costs $70,000, has a life of 6 years, an annual cost of $2500, and requires two operators at a cost of $24 per hour each to process 6 tons per hour. Assume i = 7% per year and 2080 hours per work year. Determine the annual breakeven tonnage of scrap metal at i = 7% per year and select the better machine for a processing level of 1500 tons per year.
Leroy purchased an AI-based robotics system with the first cost of $345,000, an AOC of $148,000 per year, a $140,000 salvage value, and an ESL of 3 years. Rather than trading after 3 years, he kept the system for a total of 5 years. Due to the wear factor and expense of repairs, its AOC increased to $240,000 per year starting in year 4, plus the salvage value went to zero. At i= 10% per year, what is the percentage increase in the AW of costs that Leroy experienced? The percentage increase in the AW of costs that Leroy experienced is %.
None
A manufacturing company has the choice of two suppliers to buy a piece of equipment from to use in its process. Characteristics of these two suppliers and associated costs are tabulated below. The equipment from supplier A costs more to buy and maintain, but it also has more revenue per unit sold. Selling enough units will at some point make it worth the higher cost. How many units per year must the company sell in order to justify using supplier A (i.e. what is the breakeven number of units to sell)? Use an interest rate of 12% per year. Supplier A Supplier B Initial cost $4,000 $3,000 Sale price (revenue per unit) $4 $3 Transportation costs (per unit) $0 $1.25 Annual maintenance cost $1,400 $1,100 Salvage value $800 $700 Useful life of the equipment (years) 5 4
Jensen Systems purchases several parts for the instruments it makes via a fixed-price contract of $155,000 per year from a local supplier. The new president of Jensen wants to make the parts inhouse through the purchase of equipment that will have a first cost of $240,000 with an estimated salvage value of $30,000 after 5 years. The AOC is difficult to estimate, but company engineers have made optimistic, most likely, and pessimistic estimates of $70,000, $85,000, and $120,000 per year, respectively. Determine if the company should purchase the equipment under any of the operating cost scenarios. The MARR is 20% per year.
None

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