Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 16, Problem 7P
To determine
Calculate the annual fee.
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John is evaluating his truck inventory. One three year old vehicle has a book value of $22 500. Currently its maintenance costs are $1 100 per year. They have increased by 20% annually and are expected to increase by the same percentage in the future. Calculate the equivalent annual costs for the first five years knowing that the van's purchase price was $32 000 and the minimum acceptable rate of return is 15%.
Calculate the future worth (FW) at 10% of a project that will save $25K per year for 20 years. The first cost is $120K, and the salvage value is $20K. Compare this with the PW and the EAW. (Please show the process and solution ty.)
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Contemporary Engineering Economics (6th Edition)
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- A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm's production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,025.00 per year for 8 years and costs $102,242.00. The ÚGA-3000 produces incremental cash flows of $27,530.00 per year for 9 years and cost $126,773.00. The firm's WACĆ is 8.37%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.arrow_forwardDon't use Excel and pen or paperarrow_forwardthis are homework questions, pls explain the correct answer :arrow_forward
- Full solutionarrow_forwardComplete the following analysis of cost alternatives and select the preferred alternative. The study period is 10 years and the MARR = 10% per year. "Do Nothing" is not an option. A B $15,000 $16,100 240 290 1,000 1,250 -$41,731 - $45,131 Capital investment Annual costs Market value at EOY 10 FW (10%) Click the icon to view the interest and annuity table for discrete compounding when i = 10% per year. The FW of the alternative C is $. (Round to the nearest dollar.) Select the preferred alternative. Choose the correct answer below. OA. Alternative C OB. Alternative A OC. Alternative B O D. Alternative D D $17,900 110 1,950 ??? - $46,231 с $12,500 450 1,800arrow_forwardA manager is considering installation of one of the following two machines in his factory 24 Panther $30,000 Cheeler More Info 1 $90,000 $20,000 $30,000 4 6 None None Initial Cost Annual Costs Service life (years) Salvage value Since the machines have different service lives, his economic analysis will assume repeatability and use an analysis period of 12 years. Given a MARR of 10% per year, calculate the following two parameters Click the icon to view the interest and annuity table for discrete compounding when /-10% per month. The EUAC of the Cheeter over the analysis period is (select the closest value) OA. $9,335 OB. $50,665 OC. $43,209 OD. $101,330 OE. $56,417 The PW of the Cheeter over the analysis period is (select the closest value). OA. $441,318 OB. $384,408 OC. $345,216 The of " wie OA BI O . Ос OR H " 0 0 " 15 ожи кли Derm TOW 5 6 B 9 0 T Y U 1 O Parrow_forward
- Project A costs $35,000 initially, has a 4-year life and incurs $4,000 in annual year-end costs. Project B costs $39,000 initially, has a 5-year life and incurs $4,500 in annual year-end costs. If the company's required return is 10%, calculate the equivalent annual cost of each project. Options Project A $16,788; Project B $15,211 Project A $13,452; Project B $12,924 Project A $15,041; Project B $14,788 Project A $12,623; Project B $11,679 Project A $14,190; Project B $13,250arrow_forwardQ-For I= 15%, Solve for the Equivalent Uniform Annual Cost (EUAC) in periods 1 to 5, Provide any additional or modified cash flow diagrams necessary for your solution and show all work. All values are csot except the $4000 salvage, which is a benefit. The cash flow diagram for the question provided in the picture below.arrow_forwardA firm urgently needs a large printer and will either lease a printer at an end-of-year cost of $ 5000 for a 6 year period, or they will purchase the printer at an initial cost of $60,000. If purchased, the printer will have a zero salvage value at the end of 6-years life. No other costs are to be considered. MARR is 5%. What is the best investment decision on the basis of the internal rate of return. a. IRR could not be calculated due to no change in cashflow sign b. Negative IRR is not justified and is not applied here to make a proper decision c. Lease d. Buyarrow_forward
- A firm is considering purchasing computers that will reduce annual costs by P40,000. The Computers costs P300,000 and has a salvage value of P50,000 and a life of 7 years. The annual maintenance cost is P6,000, while not in use by the firm, the computers can be rented to others to generate an income of P10,000 per year. If money can be invested for an 8% return, using the annual cost method, how much is the savings or excess cost the fırm has in buying the computers?arrow_forwardAn old machine cost P48,000.00 a year to maintain. What expenditures for anew machine is justified if no maintenance will be acquired for the first 3 years,P12,000.00 per year for the next 7 years, and P48,000 a year thereafter?Assume money to cost 4% compounded annually and no other costs to beconsidered.arrow_forwardam. 132.arrow_forward
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