Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 16P
To determine
Calculate the capital recovery cost.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Your firm has purchased an injection molding machine at a cost of $100,000. The machine's useful life is estimated at 8 years. Your accounting department has estimated the
capital cost for this machine at about $25,455 per year. If your firm's minimum acceptable rate of return is 20%, how much salvage value did the accounting department assume at
the end of 8 years? Use Capital Recovery method.
A California utility firm is considering building a 50-megawatt geothermalplant that generates electricity from naturally occurring underground heal. The binary geothermal system will cost $85 million to build and $6 million (including any income-tax effect) to operate per year. (Unlike a conventional fossil fuel plant, this system will require virtually no fuel costs.) The geothermal plant is to last 25 years. At the end of that time, the expected salvage value will be about the same as the cost to remove the plant. The plant will be in operation for 70% (the plant-utilization factor) of the year (or 70% of 8,760 hours per year). If the firm's MARR is 14% per year, determine the cost of generating electricity per kilowatt-hour.
A California utility firm is considering building a 50-megawatt geothermalplant that generates electricity from naturally occurring underground heal. The binary geothermal system will cost $85 million to build and $6 million (including any income-tax effect) to operate per year. (Unlike a conventional fossilfuel plant, this system will require virtually no fuel costs.) The geothermal plant is to last 25 years. At the end of that time, the expected salvage value will be about the same as the cost to remove the plant. The plant will be in operation for 70% (the plant-utilization factor) of the year (or 70% of 8,760 hours per year). If the firm's MARR is 14% per year, determine the cost of generating electricity per kilowatt-hour.
Chapter 6 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Consider the cash flows in Table P6.7 for the...Ch. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - The repeating cash flows for a certain project are...
Ch. 6 - Beginning next year, a foundation will support an...Ch. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Prob. 17PCh. 6 - Prob. 18PCh. 6 - The Geo-Star Manufacturing Company is considering...Ch. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - Prob. 23PCh. 6 - Prob. 24PCh. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Prob. 28PCh. 6 - Prob. 29PCh. 6 - Prob. 30PCh. 6 - Prob. 31PCh. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Prob. 34PCh. 6 - Prob. 35PCh. 6 - Prob. 36PCh. 6 - Prob. 37PCh. 6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42PCh. 6 - Prob. 43PCh. 6 - Prob. 44PCh. 6 - Prob. 45PCh. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 51PCh. 6 - Prob. 52PCh. 6 - Prob. 53PCh. 6 - Prob. 1STCh. 6 - Prob. 2STCh. 6 - Prob. 3STCh. 6 - Prob. 4ST
Knowledge Booster
Similar questions
- Please manually solve this problems. THank youarrow_forwardA certain factory building has an old lighting system. To light this building costs, on average, $30,000 a year. A lighting consultant tells the factory supervisor that the lighting bill could be reduced to $8,000 a year if $55,000 were invested in a new lighting system for the factory building. If the new lighting system is installed, an incremental maintenance cost of $4,000 per year must be considered. If the old lighting system has zero salvage value and the new lighting system is estimated to have a life of 20 years, what is the net annual benefit for this investment in new lighting? Consider the MARR to be 12%. Also consider that the new lighting system has zero salvage value at the end of its life.arrow_forwardA new utility service truck can be purchase for $70,043. Its expected useful life is six years, at which time its market value will the zero. Annual receipts less expenses will be approximately $28,084 per year over the six-year study period. Compute Present Worth (PW) with a MARR of 20% to determine whether this is good investment.arrow_forward
- An expenditure of $20,000 is made to modify a material-handling system in a small job shop. This modification will result in first-year savings of $2,000, a second-year savings of $4,000, and a savings of $5,000 per year thereafter. How many years must the system last if an 18% return on investment is required? The system is tailor made for this job shop and has no market (salvage) value at any time.arrow_forwardYour company is planning to expand by taking over the next-door manufacturing facility. You are faced with a buy-versus-lease option. The purchase price is $1.5 million, while you can lease it for $270,000 per year for 10 years. If purchased, it can be sold for 40% of its original price at the end of its 10 years life. In either case the annual income is estimated to be $1.2 million and the annual operating cost would be $300,000. Your company pays 38% combined income tax and the after-tax minimum attractive rate of return (MARR) is 10%. Assuming lease payments are due at the end of the year and using a straight-line depreciation over the 10 years life with full first year depreciation, determine: a. The EUAW = EUAB-EUAC for each option with MARR = 10%. Should the facility be purchased or leased? b. The break-even rate of return of purchase versus lease, i.e. ROR at which (EUAB – EUAC) purchase = (EUAB - EUAC) leasearrow_forwardYour company is considering purchasing a new CNC machining center. The net benefits in the first year will be $50,000, increasing at a rate of $4,000 per year for the subsequent nine years (so the benefits are $50,000, $54,000, $58,000, etc.). You think the company can get a salvage value of $18,000 at the end of its 10-year useful life. If the MARR is 8%, how much can the company justify spending on the CNC machining center? Solve by present worth analysis.arrow_forward
- Please give handwritten solution!!arrow_forwardThe initial cost of a pickup truck is $12,748 and will have a salvage value of $4,360 after five years. Maintenance is estimated to be a uniform gradient amount of $121 per year, with zero dollar for first year maintenance. The operation cost is estimated to be $0.3 per mile for 351 miles per month. If the interest rate is 12%, what is the annual equivalent cost (AEC) for the truck?arrow_forwardOperating and repair costs for equipment will be $15,000 per year for a 3-year warranty period, which required an initial investment of $300,000. Beginning in year 4, costs will climb at a rate of $2,500 per year. The equipment will bring $55,000 in income to the business, but starting after year 2. The equipment will be retired after year 10, with a salvage value of $30,000. Find the present worth of these costs if the firm’s interest rate is 12%. What is the annual cost of ownership?arrow_forward
- Please solve the following show solutionsarrow_forwardSteve Company is considering replacing one of its machines. The available new model has a cost of $220,000, a 16-year life, and an AOC of $2,000. The machine must also be serviced every 4 years at a cost of $10,000. The machine can be salvaged at $45, 000. The MARR is 12% How much annual net income must be realized from the machine to recover the capital investment?arrow_forwardYour engineering firm needs a rapid prototyping machine. The company gives you two options. In Option 1 you purchase the machine outright for $50,000, pay a maintenance contract of $1,000 per year (paid in advance at the beginning of each year), and expect to be able to resell the machine after 10 years at a salvage value of $10,000. In Option 2, you lease the machine at $7,000 per year (paid in advance at the beginning of each year) and pay no maintenance, but receive no salvage. Assume that you will be able to take in $8,000 per year in income from this machine. Also assume that an additional option is not to buy the machine at all, but to put the money in the bank at 5% nominal interest rate, compounded annually. Which option will be best for the firm?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