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 35P
(a):
To determine
Calculate the annual revenue.
(b):
To determine
Calculate the minimum processing fee.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
A company is looking at purchasing a new Zeiss CMM (precision measurement machine). They believe
having this machine will allow them to get a new contract. The machine would cost $525,000. It would
allow the manufacturer to produce 250 custom engine block heads per day (350 days per year) at a gross
profit of $1.95 each, but the company would have to pay tax of 25% on their profit. Assuming you looked at
everything on a yearly basis and that the project would go on for 5 years, what is the rate of return (%) on
this project?
(round to the nearest tenth of a percent)
3.5%
9.5%
7.0%
7.5%
Cori's Meats is looking at a new sausage system with an installed cost of $495,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $73,000. The sausage system will save the firm $175,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $32,000. If the tax rate is 23 percent and the discount rate is 10 percent, what is the NPV of this project?
A large food-processing company is considering using laser technology to speed up and
eliminate waste in the potato-peeling process. To implement the system, the company
anticipates needing $3.2 million to purchase the industrial-strength lasers. The system will
save $1,500,000 per year in labor and materials. However, it will incur an additional
operating and maintenance cost of $300,000 per year. Annual income taxes will be
$170,000. The system is expected to have a 10-year service life and a salvage value of
$200,000. If the company's MARR is 18%, calculate the net present worth of this
investment.
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
- A semiconductor chip maker purchased a small manufacturing process plant for $2,131,020. The money coming in from that purchase was determined to be $500,000 annually in before-tax cash flow during its 10-year use. The net cash flow after tax is $300,000. If the chip maker wants to realize a 10% return on its investment after tax, for how many more years should the plant operate? (hint, tables)arrow_forwardRR must build a tunnel to maintain his access around the mountain. The tunnel could be fabricated of normal steel for an initial cost of $45,000 and should last for 18 years. Maintenance will cost $1,000 per year.Another option would be to use corrosion resistant steel, which will last for 18 years, with annual maintenance cost of $100. In 18 years there would be no salvage value for either bridge. RR pays combined federal and state taxes at the 48% marginal rate and uses straight-line depreciation. If the after tax MARR is 10%, what is the maximum amount that should be spent on the corrosion-resistant tunnel?arrow_forwardA program to improve a ferry system by adding new technology has much promise. The new system will cost $5 million with an annual operating cost of $900,000 over the 30-year anticipated lifespan. The benefits are expected to be $2.0 million in the first year of operation and grow at a constant rate of 4% per year. The municipal government who runs the ferry uses a 5% discount rate to evaluate its new systems. Compute the net present value.arrow_forward
- The General Mills Company (GMC) purchased a milling machine for $90,000, which it intends to use for the next five years. This machine is expected to save GMC $31,000 during the first operating year. Then the annual savings are expected to decrease by 2% each subsequent year over the previous year due to increased maintenance costs. Assuming that GMC would operate the machine for an average of 4,000 hours per year and that it would have no appreciable salvage value at the end of the five-year period, determine the equivalent dollar savings per operating hour at 9% interest compounded annually. The equivalent net savings are $ per operating hour.arrow_forwardRaytheon wishes to use an automated environmental chamber in the manufacture of electronic components. The chamber is to be used for rigorous reliability testing and burn-in. It is installed for $1.4 million and will have a salvage value of $200,000 after 8 years. Its use will create an opportunity to increase sales by $650,000 per year and will have operating expenses of $250,000 per year. Corporate income taxes are 40 percent. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW, for 8 years. After-tax MARR is 10 percent. Use 7- years class depreciation for MACRS and IRR if the chamber is keptarrow_forwardThe General Mills Company (GMC) purchased a milling machine for $80,000, which it intends to use for the next five years. This machine is expected to save GMC $37,000 during the first operating year. Then the annual savings are expected to decrease by 4% each subsequent year over the previous year due to increased maintenance costs. Assuming that GMC would operate the machine for an average of 4,000 hours per year and that it would have no appreciable salvage value at the end of the five-year period, determine the equivalent dollar savings per operating hour at 8% interest compounded annually. Click the icon to view the interest factors for discrete compounding when i = 8% per year. The equivalent net savings are $ per operating hour. (Round to the nearest cent.)arrow_forward
- Please answer quickly and correctlyarrow_forwardYou have installed a field of wind turbines with a total initial investment of 42,000,000TL, which includes the cost of all equipment purchases, installation, additional fixed costs, and working capital. The field has an expected lifetime of 20 years and is expected to generate 12,300 MWh/year of electricity under normal conditions. Annual operating, maintenance and labor costs are estimated to be 2,200,000 TL, all of which are tax deductable. Assume that your initial investment of 42 million TL includes 35,000,000 of fixed capital investment that will depreciate over 20 years according to the straight-line depreciation method. You will need to pay 23% corporate tax on your taxable income. Salvage values are assumed to be zero. F'r the baseline solution, you can assume 100% equity Önancing. Assume that you can sell electricity at an (expected) price of 0.75 TL per kW/h. Your company uses a real (ináation - adjusted) MARR of 6%. Use a spreadsheet for your calculations and return it as a…arrow_forwardYour company is considering the purchase of a 30-tonne hoist. The first cost is expected to be $230,000. Net savings will be $38,000 per year over a 12-year life and will be salvaged for $32,715. If the company's after-tax MARR is 8% and it is taxed at 45%, what is the future worth (FW) of this project? Note: You will have to calculate the CCA depreciation rate from the information provided.arrow_forward
- A client has an existing CAD/CAM system that costs $95,000 per year to lease (payable at the end of each year of use) and a new contract the client is considering entering will fix the price for over the next four years. The client is also considering purchasing a CAD/CAM system to replace its currently leased system (rather than renewing / entering a new lease contract). The new system will cost $450,000 to purchase and install. The system has an estimated life of five years, when it is expected to become obsolete, but it will have a salvage value of $25,000. The interest rate is projected to be 6% per year during the life of the project. a. Draw a cash flow diagram for the next four years for the existing system (leased system) and a separate cash flow diagram for the system that is being considered for purchase. b. For each option (leasing and buying), calculate the value of all cash receipts and disbursements at the end of the third year. c. Compare the value of each option at…arrow_forwardMaintenance money for an athletic complex has been sought. Mr. Kendall, the Athletic Director, would like to solicit a donation to cover all future expected maintenance costs for the building. These maintenance costs are expected to be $1.2 million each year for the first five years, $1.6 million each year for years 6 through 10, and $1.9 million each year after that. (The building has an indefinite service life.) If the money is placed in an account that will pay 7% interest compounded annually, how large should the gift be? Click the icon to view the interest factors for discrete compounding when i = 7% per year. The gift should be $31.35 million. (Round to two decimal places. More Info N 1 2 3 4 5 67899 10 Single Payment Compound Amount Factor (F/P, I, N) 1.0700 1.1449 1.2250 1.3108 1.4026 1.5007 1.6058 1.7182 1.8385 1.9672 Present Worth Factor (P/F, I, N) 0.9346 0.8734 0.8163 0.7629 0.7130 0.6663 0.6227 0.5820 0.5439 0.5083 Print Compound Amount Factor (F/A, I, N) 1.0000 2.0700…arrow_forwardKlinken Corporation's contribution margin ratio on the sale of its most popular product is 42% . The product is priced at $100 , annual fixed expenses are $900,000 . Management is evaluating two options : (1) lowering variable costs by 15 and (2) reducing fixed expenses by 15% .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:PEARSONEngineering 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 LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial 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