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 46P
To determine
Calculate the net cash flow.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Dog
A 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
$15,500
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 year
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
- Blue Inc. is considering producing a short-lived fad item, which it estimates will have a project life of three years. The only fixed assets it will need to purchase is some machinery which costs $120,000, plus $10,000 to modify it for this project's use. The machinery will be depreciated using the MACRS 5-year property class schedule, and Blue estimates that the machinery could be sold at the end of the third year for $70,000. In addition to expenditures on fixed assets, this project would cause the firm's cash needs to increase by $15,000 and additional raw materials inventory will go up by $5,000, both at Time 0. It also estimates that by the end of Year 1, accounts receivable will rise by $6,000. The new product's sales revenues are expected to be $90,000 each year. Total costs excluding depreciation are estimated to be $30,000. The company's marginal tax rate is 34 percent, and the firm estimates is overall WACC to be 16.00 percent. Inflation is zero. What are the project's NPV…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_forwardA high-speed electronic assembly machine was purchased two years ago for $50,000. At the present time, it can be sold for $27,000 and replaced by a newer model having a purchase price of $44,000; 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%, answer the following two questions: Challenger O&M Costs Year Market Value 0 $44,000 1 2 34,000 27,000 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. $12,000 13,000 Defender Market Value $27,000 19,000 O&M Costs $14,000 1. The minimum EUAC value of the challenger is ○ A. $30,390 B. $25,771 ○ C. $30,554 D. $27,280 ○ E. $24,080 2. The marginal cost of keeping the defender in service for one more year is OA. $33,000 B. $25,240 C. $10,280 OD. $11,240 O E. $22,000arrow_forward
- A subsidiary of AEP places in service electric generating and transmissionequipment at a cost of $3,000,000. It is expected to last 30 years with a salvage value of $250,000. The equipment will increase net income by $500,000 in the first year, increasing by 2.4% each year thereafter. The subsidiary’s tax rate is 25% and the after-tax MARR is 9%. There is some concern that the need for this equipment will last only 10 years and will need to be sold off for $550,000 at that time. Develop tables using aspreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR after only 10 years to see if the venture would be worthwhile economically. Solve, a. Use straight-line depreciation (no half-year convention). b. Use MACRS-GDS and state the appropriate property class. c. Use double declining balance depreciation (no half-year convention, no switching).arrow_forwardB2B 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_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
- A start-up biotech company is considering making an investment of $100,000 in a new filtration system. The associated estimates are summarized below: Annual receipts $75,000 Annual expenses $45,000 Useful life 8 years Terminal book value (EOY 8) $20,000 Terminal market value $0 Straight-line depreciation will be used, and the effective income tax rate is 20%. The after-tax MARR is 15% per year. Determine whether this investment is an attractive option for the company.arrow_forwardAn industrial organization has established an automated assembly line (for $360,000) that will reduce labor costs by $56,000 each year for 10 years. The Internal Revenue Service has ruled that you must depreciate the assembly line on a Straight Line (SL) basis with a depreciable life of 10 years. After-tax MARR is 10% per year. The effective income tax rate is 25%. After 10 years, the machine will have zero salvage value. a) Draw a table showing Before Tax Cash Flow (BTCF) and After-Tax Cash Flow (ATCF). b) Calculate the after-tax PW and IRR. (Use interpolation method to find IRR). Is it feasible?arrow_forwardVigor Pharmaceuticals Ltd. is considering investing in a new production line for its pain-reliever medicine for individuals who suffer from cardiovascular diseases. The company has to invest in equipment which costs $2,500,000 and will be depreciated under the MACRS system for a 5-year asset class. It is expected to have a scrap value of $700,000 at the end of the project. Other than the equipment, the company needs to increase its cash and cash equivalents by $100,000, increase the level of inventory by $30,000, increase accounts receivable by $250,000 and increase account payable by $50,000 at the beginning of the project. Vigor Pharmaceuticals expect the project to have a life of five years. The company would have to pay for transportation and installation of the equipment which has an invoice price of $450,000. The company has already invested $75,000 in Research and Development and therefore expects a positive impact on the demand for the new pain-reliever. Expected annual sales…arrow_forward
- Using the asset description and table below, find the economic service life (ESL) of the asset, assuming MARR = 8%. The company is committed to using the asset for the upcoming year, but is unsure about the following years. Today's market value is $70,000, and it will last another 4 years before failure. Each year, the after-tax market value decreases by $10,000. The operating cost of the asset in year 1 is expected to be $30,000, and it will increase by $5,000 each year through year 4. a. 3 yearsb. 1 yearc. 4 yearsd. 2 yearsarrow_forwardNote:Hand written solution should be avoided.arrow_forwardQuestion 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_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education