ENGINEERING ECONOMIC ENHANCED EBOOK
ENGINEERING ECONOMIC ENHANCED EBOOK
14th Edition
ISBN: 9780190931940
Author: NEWNAN
Publisher: OXF
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Chapter 13, Problem 42P
To determine

Whether the existing asset should be replaced or not.

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Sacramento Cab Company owns several taxis that were purchased for $25,000 each 4 years ago. The cabs’ current market value is $12,000 each, and if they are kept for another 6 years they can be sold for $2000 per cab. The annual maintenance cost per cab is $1000 per year. Sacramento Cab has been approached about a leasing plan that would replace the cabs. The leasing plan calls for payments of $6000 per year. The annual maintenance cost for each leased cab is $750 per year. Should the cabs be replaced if the interest rate is 10%?The local telephone company purchased four special pole hole diggers 8 years ago for $14,000 each. Owing to an increased workload, additional machines will soon be required.
Below is a chart with different distances and their total cost for this vehicle please find the marginal costs for as distance increases. Distance(KM) Total Costs($) Marginal Costs($) PER KM 0 $ 25000 $57066 50000 $62946 $ 75000 $70147 $ 100000 $77713 $ 125000 $85762 150000 $95861 $
Economics Last year, a decision was made to keep the same equipment in lieu of buying new equipment. The old equipment's trade-in value last year was $4000 and its value this year is $2000. The operating cost was $700 last year. If bought last year, the new equipment would have cost $13K, the salvage value after 8 years would be $2000, and it would have an annual operating cost of $4000. If bought last year, what would have been the EUAC of the new equipment (in dollars) at 16% interest rate per year? (provide your answer in the box as a negative value if you arrive at costs) What would have been the correct decision? (provide your answer and justification in your pdf file submission)
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