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 48P
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
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
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
II
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 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_forwardBlue 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_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_forwardSolve correctly in excel Six years ago, a company purchased $30,000 of equipment. The equipment has just been sold for $5000. The equipment was depreciated using 50% bonus depreciation / 50% MACRS (using a 5-year recovery period). The actual savings due to the purchase of the equipment is shown below. The firm's MARR is 12% and it's tax rate is 25%. What is the after-tax present worth of the investment? Year 1 2 3 4 5 6 Savings 5000 6000 7000 7000 4000 3000arrow_forwardXYZ Manufacturing is considering the purchase of a new punch press. This press will cost $63,112. This asset will be depreciated using an MACRS (GDS) recovery period of seven years. The book value (BV) at the end of the second year?arrow_forward
- An 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_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_forwardA 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.arrow_forward
- A 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_forwardBlastCo Analytics needs to purchase a new metal shaper. BlastCo's after-tax MARR is 12% and the corporate tax rate is 54%. A metal shaper is a CCA Class 8 asset. The remaining data are contained in the table below. Model Flex First Cost Economic Life (Years) Annual Net Salvage Savings Value $50,000 $100,000 5 $20,000 Blender $120,000 5 $55,000 $25,000 Flextastic $200,000 5 $75,000 $100,000 (a) Using the annual worth method, which model should BlastCo buy? (b) What is the approximate after tax IRR of each model? (c) What is the exact after tax IRR of each model?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
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