Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 23P
To determine
Best strategy.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Please solve without using excel, solve using formulas or tables
Question 2
With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal to that of machine Y at an interest rate of 10% per year. Determine the replacement value. Machine X Machine Y Market Value, $ ? 87,000 Annual Cost, $ per Year −58,000 −40,000 for year 1,increasing by 2000 per year thereafter. Salvage Value 16,500 21,000 Life, Years 3 5 The replacement value is $ .
Full explain this question and text typing work only thanks
The Riteway Ad Agency provides cars for its sales staff. Its present fleet of cars is three years old and will be sold very shortly. To
provide a replacement fleet, the company is considering two alternatives:
Purchase alternative: The company can purchase the cars and sell them in three years.
Ten cars would be purchased for $15,000 each. If this
alternative is chosen, the entire fleet will incur the
following costs:
Annual cost of servicing, taxes, and licensing
$ 3,100
Repairs, first year
$ 1,000
Repairs, second year
$ 3,500
$ 5,500
Repairs, third year
At the end of three years, the fleet could be sold for one-half of the original purchase price.
Lease alternative:
The company can lease the cars under a three-year lease
contract costing $50,000 per year (the first payment due at the
end of Year 1). As part of this lease agreement, the owner
would provide all servicing and repairs, license the cars, and
pay the taxes. Riteway would make a $10,500 security deposit at
the beginning of…
Chapter 14 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 14 - Prob. 1PCh. 14 - Prob. 2PCh. 14 - Prob. 3PCh. 14 - Prob. 4PCh. 14 - Prob. 5PCh. 14 - Prob. 6PCh. 14 - Prob. 7PCh. 14 - Prob. 8PCh. 14 - Prob. 9PCh. 14 - Prob. 10P
Ch. 14 - Prob. 11PCh. 14 - Prob. 12PCh. 14 - Prob. 13PCh. 14 - Prob. 14PCh. 14 - Prob. 15PCh. 14 - Prob. 16PCh. 14 - Prob. 17PCh. 14 - Prob. 18PCh. 14 - Prob. 19PCh. 14 - Prob. 20PCh. 14 - Prob. 21PCh. 14 - Prob. 22PCh. 14 - Prob. 23PCh. 14 - Prob. 24PCh. 14 - Prob. 25PCh. 14 - Prob. 26PCh. 14 - Prob. 27PCh. 14 - Prob. 28PCh. 14 - Prob. 29PCh. 14 - Prob. 30PCh. 14 - Prob. 31PCh. 14 - Prob. 32PCh. 14 - Prob. 33PCh. 14 - Prob. 34PCh. 14 - Prob. 35PCh. 14 - Prob. 36PCh. 14 - Prob. 37PCh. 14 - Prob. 38PCh. 14 - Prob. 39PCh. 14 - Prob. 40PCh. 14 - Prob. 41PCh. 14 - Prob. 42PCh. 14 - Prob. 43PCh. 14 - Prob. 44PCh. 14 - Prob. 45PCh. 14 - Prob. 46PCh. 14 - Prob. 47PCh. 14 - Prob. 48PCh. 14 - Prob. 49PCh. 14 - Prob. 1STCh. 14 - Prob. 2STCh. 14 - Prob. 3ST
Knowledge Booster
Similar questions
- A machine costs $19,310 and is expected to have a scrap value of $2,991 whenever it is retired. Operating and Maintenance costs are $1,047 for the first year and expected to increase by $1,751 thereafter. If the MARR is 12%, determine the minimum equivalent uniform annual cost associated with the optimal economic life of the machine. The service life of this machine is 5 years. Note: round your answer to two decimal places, and do not include spaces, currency signs,arrow_forwardMachine X costs $248,751 with annual operating and maintenance costs of $9,980. Machine Y costs $264,500 with annual operating and maintenance costs of $5120. Both machines are Class 43 (CCA=30%). The company needs the machines for 11 years, after which machine X can be sold for $12,257 and machine Y can be sold for $13,033. The company’s MARR is 10%, and its tax rate is 27%. Do an after-tax analysis to determine which machine should be purchased.arrow_forwardThe cost of a replacement packaging machine if $95,000. The machine is anticipated to reduce the packaging costs by $20 per parcel. The company expects to send out 25,000 parcels per year. The salvage values of the machine is anticipated to be $23,000 at the end of 10 years. What is the present worth of the machine if the after-tax MARR is 10%, the CCA rate is 20%, and the tax rate is 40%? [Enter your response in $. Round to the nearest full dollar]arrow_forward
- 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 yearsarrow_forwardAn old forklift is due for a replacement analysis. It has a current market value $9,000. The market values and operation and maintenance costs for each of the remaining years of service are given below. The MARR is 11% per year. (a) Complete the table of marginal costs of the old forklift for each (b) If the challenger has a minimum EUAC of $4,213, answer the two additional questions. the remaining years of service. Forklift (Defender) Year MV at EOY O&M Costs 1 $7,000 6,000 $2,000 2,000 2,500 3,500 5,000 4 3,000 Click the icon to view the interest and annuity table for discrete compounding when MARR = 11% per year. Fill in the table below. (Round to the nearest dollar.) Year Marginal Cost 1 3 (b) Since Analysis Technique No 2 is applicable here (make sure you know why, Example 5 Module 10), which additional calculation is required before the replacement decision can be made? O A. The minimum EUAC of the defender over its remaining life O B. The minimum marginal cost of the challenger…arrow_forwardA hospital in The Upper Cumberland 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 yearsarrow_forward
- O.arrow_forwardGeorgia Ceramic Company has an automatic glaze sprayer that has been used for the past 10 years. The sprayer can be used for another 10 years and will have a zero salvage value at that time. The annual operating and maintenance costs for the sprayer amount to $15,000 per year. Due to an increase in business, a new sprayer must be purchased, either in addition to or as a replacement for the old sprayer. Option 1: if the old sprayer is retained, a new, smaller capacity sprayer will be purchased at a cost of $48,000; this new sprayer will have a $5,000 salvage value in 10 years and an annual operating and maintenance costs of $12,000. The old sprayer has a current market value of $6,000. Option 2: if the old sprayer is sold, a new sprayer of larger capacity will be purchased for $84,000. This sprayer will have a $9,000 salvage value in 10 years and annual operating and maintenance costs of $24,000. Which option should be selected at MARR = 12%.arrow_forwardAdvanced Electrical Insulator Company is considering replacing a brokeninspection machine, which has been used to test the mechanical strength of electrical insulators with a newer and more efficient one. If repaired, the old machine can be used for another five years although the firm does not expect to realize any salvage value from scrapping it in five years. Alternatively, the firm can sell the machine to another firm in the industry now for $5,000. If the machine is kept, it will require an immediate $1,200 overhaul to restore it to operable condition. The overhaul will neither extend the service life originally estimated nor increase the value of the inspection machine. The operating costs are estimated at $2,000 during the first year and are expected to increase by $1,500 per year thereafter. Future market values are expected to decline by $1,000 per year. The new machine costs $10,000 and will have operating costs of $2,000 in the first year, increasing by $800 per year…arrow_forward
- Two options of feed-water storage installation are being considered to serve over 20 years of useful life: Option 1: Build a 20,000-gallon tank on tower. The cost of installing the tank and tower is estimated to be $170,000. The annual operating and maintenance cost after tax adjustment is estimated to be $2,000. The salvage value is estimated to be negligible. Option 2: Place a 20,000-gallon tank of equal capacity on a hill near the refinery. The cost of installing the tank on the hill, including the extra length of service lines, is estimated to be $120,000 with negligible salvage value. The annual operating and maintenance cost of the water tank is estimated to be $1,500 after tax adjustment. Because of the location, an additional investment of 13,000 in pumping equipment is required. The pumping equipment is expected to have a service life of 10 years with a salvage value of $2,000 at the end of that time. The annual operating and maintenance cost (including any incometax effects)…arrow_forwardPROBLEM NO. 2: A certain equipment costs P7,000 has an economic life "n" years and a salvage value of P350 at the end of "n" years. If the book value at the end of 4 years is equal to P2197.22, compute the economic life of the equipment using the Sum of the Years digit method. PROBLEM NO. 3:arrow_forwardYou are considering the purchase of a new high-efficiency machine to replace older machines now. The new machine can replace four of the older machines, each with a current market value of $600. The new machine will cost $5000 and will save the equivalent of 10,000 kWh of electricity per year. After a period of 10 years, neither option (new or old) will have any market value. If you use a before-tax MARR of 25% and pay $0.075 per kilowatt-hour, would you replace the old machines today with the new one?A professor of engineering economics owns an older car. In the past 12 months, he has paid $2000 to replace the transmission, bought two new tires for $160, and installed a music system for $110. He wants to keep the car for 2 more years because he invested money 3 years ago in a 5-year certificate of deposit, which is earmarked to pay for his dream machine, a red European sports car. Today the old car’s engine failed.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning