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 31P
(a):
To determine
Calculate the annual cost of defender.
(b):
To determine
Calculate the annual cost of challenger.
(c):
To determine
Calculate the annual cost of the defender to keep one more year.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A stamping machine is classified as seven-year MACRS property. The costbasis for the machine is $120,000, and the expected salvage value is $10,000 at the end of 12 years. Compute the book value at the end of three years for tax purposes.
Dog
A machine now in use was purchased four years
ago at a cost of $30,000. It has a book value of
$9,369. It can be sold for $12,000, but it could be
used for three more years, at the end of which
time, it would have no salvage value. What is the
current amount of economic depreciation for this
asset?
Choose from the folowing,
$12,000
$18,000
$32,000
$48,000
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
- Your company is contemplating the purchase of a large stamping machine. The machine will cost $180,000. With additional transportation and installation costs of $5,000 and $10,000, respectively, the cost basis for depreciation purposes is $195,000. Its MV at the end of five years is estimated as $40,000. The IRS has assured you that this machine will fall under a three-year MACRS class life category. The justifications for this machine include $40,000 savings per year in labor and $30,000 savings per year in reduced materials. The before-tax MARR is 20% per year, and the effective income tax rate is 40%. Use this information to solve, The taxable income for year three is most nearly (a) $5,010 (b) $16,450 (c) $28,880 (d) $41,120 (e) $70,000.arrow_forwardA new barcode reading device has an installed cost basis of $22,100 and an estimated service life of eleven years. It will have a zero salvage value at that time. The 200% declining balance method is used to depreciate this asset a. What will the depreciation charge be in year eleven? b. What is the book value at the end of year ten? c )What is the gain (or loss) on the disposal of the device if it is sold for $2,800 after ten years?arrow_forwardA company has decided to buy a machine for $50,000. It will depreciate the machine on a straight-line basis over its useful life of five years. The tax rate of the company is 40% and the proper discount rate 10%. The following tables gives the resale value, S of the machine and its pretax revenue, E. The company has the option to keep or sell the machine at any time. What is the optimal time to replace the machine?arrow_forward
- B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $240,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 96,000 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales $ 150,000 Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses 80,000 20,000 15,000 Total costs and expenses 115,000 Pretax income 35,000 10,500 Income taxes (30%) Net income $24,500 1. Compute the payback period. Payback Period Choose Denominator: Payback Period Choose Numerator: Payback period IIarrow_forwardAt times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $2,400,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t = 0. • The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. • Replacing the old machine will require an investment in net operating working capital (NOWC) of…arrow_forwardA high-speed electronic assembly machine was purchased two years ago for $50,000. At the present time, it can be sold for $26,000 and replaced by a newer model having a purchase price of $37,500; or it can be kept in service for a maximum of one more year. The new assembly machine, if purchased, has a useful life of not more than two years. If the before-tax MARR is 12%, when should the old assembly machine be replaced? Use the following data table for your analysis. Challenger Defender O&M Costs $11,500 13,000 Year 0 Market Value $37,500 31,000 1 2 26,000 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. The minimum EUAC value of the challenger is $ Market Value $26,000 16,500 (Round to the nearest dollar.) O&M Costs $15,500arrow_forward
- Question 5.3 price is $120,000, and an additional $30,000 is required to modify the equipment for special use by the company. The truck falls into the MACRS seven-year classification (the tax life), and it will be sold after five years (the project life) for $55,000. The purchase of the truck will have no effect on revenues, but it is expected to save the firm $65,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 20%. Assume that the initial investment is to be financed by a bank loan at an interest rate of 10% payable annually. Determine the after-tax cash flows and the net present worth of the investment for this project if the firm's MARR is known to be 15%. A company considerings acquiring a new heavy-duty truck. The purchase A) $118,059 B) $133,600 C) $90,022 D) Answers A, B and C are not correctarrow_forwardA new barcode reading device has an installed cost basis of $24,160 and an estimated service life of eight years. It will have a zero salvage value at that time. The 200% declining balance method is used to depreciate this asset. a. What will the depreciation charge be in year eight? b. What is the book value at the end of year seven? c. What is the gain (or loss) on the disposal of the device if it is sold for $3,400 after seven years?arrow_forwardA building was constructed at a cost of 10,00,000. This building was estimated to have a useful life of 50 years with no scrap value. How much is the building worth at the end of 40 years if depreciation charges had been set as follows: double declining for the first 15 years. SYD for the succeeding 15 years. and straight line method for the next succeeding 10 years.arrow_forward
- A high-speed electronic assembly machine was purchased two years ago for $50,000. At the present time, it can be sold for $24,000 and replaced by a newer model having a purchase price of $41,500: or it can be kept in service for a maximum of one more year. The new assembly machine, if purchased, has a useful life of not more than two years. If the before-tax MARR is 18%, when should the old assembly machine be replaced? Use the following data table for your analysis. Challenger TAerket Volye $41,500 De fender DRM Coste DRM Cost Merhel Voiue 524.000 30.000 17 500 $14,000 58.000 12,000 24,000 A Click the icon to view the interest and annuity table for discrete compounding when the MARR Is 18% per year The minimum EUAC value of the challenger is S (Round to the nearest dollar.) The marginal cost of keeping the defender in service for one more year is $(Round to the nearest dallar.) The old assembly machine should be replaced immediately in one yeararrow_forwardA hydraulic crane service company had sales revenue of $2,250,000 from operations during tax-year 1. The following table provides other financial information relating to the tax year: Labor expenses Materials costs Depreciation expenses $550,000 $385,000 $132,500 Interest expenses Rental expenses Proceeds from sale of old equipment with a $23,000 book value of $20,000 $22,200 $45,000arrow_forwardAn automated assembly line is purchased for $1,250,000. The company has decided to use the units-of-production depreciation. At the end of 8 tears, the line will be scrapped for $250,000. Using the following information, determine the depreciation schedule for the assembly line. Year Production Level 1 5,000 units 2 10,000 units 3 15,000 units 4 15,000 units 5 20,000 units 6 20,000 units 7 10,000 units 8 5, 000 unitsarrow_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