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 40P
To determine
Calculate the annual cost of selecting ROT8.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Two installations are being considered to provide for water storage in a chemical plant. A tank on a tower or a tank of equal capacity placed on a hill some distance from the plant. The cost of installing the tank and tower is estimated at P350,000. The cost of installing the tank on the hill, including the extra length of serv
Two installations are being considered to provide for water storage in a chemical plant. A tank on a tower or a tank of equal capacity placed on a hill some distance from the plant. The cost of installing the tank and tower is estimated at P350,000. The cost of installing the tank on the hill, including the extra length of service lines, is estimated at P300,000. The hill installation will require an additional investment of P30,000 in pumping equipment whose life is estimated to be 15 years with a salvage value of P2,500. The life of the two installations is estimated to be 30 years. Annual cost of labor, electricity, and maintenance incident to the pumping…
Cafe x is selling coffee in three different sizes at the prices and costs shown in the first table below. As shown in the
second table, they are considering raising the price of their small margin based on the estimated changes in cups sold.
You may find it helpful to use a spreadsheet for the calculations. Current Prices Increased Price for Small Coffee
Cafe X is selling coffee in three different sizes at the prices and costs shown in the first table below. As shown in the second table, they are considering raising the price of their small
to $2.75, and they project that sales of smalls will go down while sales of mediums and larges will go up slightly. Fill out the tables below to calculate the projected change in gross
margin based on the estimated changes in cups sold. You may find it helpful to use a spreadsheet for the calculations.
Current Prices
Price per Cup
Cost per Cup
Cups Sold
Small
$2.50
50.20
2,500
Medium
$3.50
50.35
1,400
$0
Revenue
$ 0
$ 0
Large
$4.50
50.50
700
0
$ 0…
Big Rock Brewery currently rents a bottling machine for $54,000 per year, including all maintenance expenses. The company is considering purchasing a machine
K
instead and is comparing two alternate options: option a is to purchase the machine it is currently renting for $165,000, which will require $22,000 per year in ongoing
maintenance expenses, or option b, which is to purchase a new, more advanced machine for $250,000, which will require $19,000 per year in ongoing maintenance
expenses and will lower bottling costs by $11,000 per year. Also, $40,000 will be spent upfront in training the new operators of the machine. Suppose the appropriate
discount rate is 8% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the rental of the machine.
Assume also that the machines are subject to a CCA rate of 25% and there will be a negligible salvage value in 10 years' time (the end of each machine's life). The
marginal corporate…
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
- Tom is considering purchasing a £20,500 car. After five years, he will be able to sell the vehicle for £7,500. Petrol costs will be £2,100 per year, insurance £650 per year, and parking £550 per year. Maintenance costs will be £900, rising by £400 per year thereafter. The alternative is for Tom to take taxis everywhere. This will cost an estimated £7,000 per year. Tom will rent a vehicle each year at a total cost (to year-end) of £900 for the family vacation, if he has no car. If Tom values money at 12% annual interest, should he buy the car? Use an annual worth comparison method (Perform all calculations using 5 significant figures and round any monetary answers to the nearest dollar). The annual cost of operating an Auto is: Number The annual cost of using taxis as an alternative is: Which option should Tom take (enter either 'Auto' or 'Taxi'? Numberarrow_forward9arrow_forwardTwo installations are being considered to provide for water storage in a chemical plant. A tank on a tower or a tank of equal capacity placed on a hill some distance from the plant. The cost of installing the tank and tower is estimated at P350,000. The cost of installing the tank on the hill, including the extra length of service lines, is estimated at P300,000. The hill installation will require an additional investment of P30,000 in pumping equipment whose life is estimated to be 15 years with a salvage value of P2,500. The life of the two installations is estimated to be 30 years. Annual cost of labor, electricity, and maintenance incident to the pumping equipment is estimated at P3,000. Taxes and insurance for both are 2.5% of the first cost. Money is worth 18% effective. Which alternative should be used? (USE PW and EUAC)arrow_forward
- Super Tennis Co is in the business of designing and manufacturing running shoes for long distance runners. They are considering a $500 million upgrade to their production line for the iPhone/iPad/ iWatch connected shoe that has Bluetooth connectivity. The potential cash flow is estimated at net revenues of $460 million per year for four years. Recently, they were advised of potential patent infringement and to eliminate this problem they are considering buying a license. YezzCo will sell a license that is good for four years of exclusive use of the patent and associated intellectual property. Super Tennis Co uses a corporate MARR of 14% and their risk-free alternatives are 6%. The VP of Engineering at Super Tennis Co estimates market volatility in demand is 40%. The VP of Marketing estimates market volatility in demand at 35%. 1.Since the VPAc€?cs trust you, they asked you to figure out the most they should pay for a license from YezzCo. 2. Super Tennis Co is known to be liberal in…arrow_forward10arrow_forwardThe City of Manila contemplates to increase the capacity of its existing water transmission line. Two plans are under consideration. Plan A requires the construction of a parallel pipe line, the flow being maintained by gravity. The initial cost is P2,750,000 and the life is 40 years, with an annual operating cost of P50,000. Plan B requires the construction of a booster pumping station costing P1,050,000 with a life of 40 years. The pumping equipment costs an additional amount of P250,000. It has a life of 20 years and a salvage value of P25,000. The annual operating cost is P165,000. If the interest rate is 12%, which is the more economical plan and by how much lower than the other? Plan B lower than Plan A by P115,906.57 Plan B higher than Plan A by P15,906.57 Plan A higher than Plan B by P15,906.57 Plan A lower than Plan B by P115,906.57arrow_forward
- The Titanic Shipbuilding Company has a noncancelable contract to build a small cargo vessel. Construction involves a cash outlay of $265,000 at the end of each of the next two years. At the end of the third year, the company will receive payment of $625,000. The company can speed up construction by working an extra shift. In this case, there will be a cash outlay of $575,000 at the end of the first year followed by a cash payment of $625,000 at the end of the second year. Use the IRR rule to show the (approximate) range of opportunity costs of capital at which the company should work the extra shift Please answer fast I give you upvotearrow_forwardYou are about to buy a piece of equipment (machine Alpha) for a project. The initial cost is $500,000 and the annual maintenance costs is $15,000. Another company offers you a second option (Machine Beta) for which the annual maintenance cost is $20,000. What is the maximum price (the initial cost) you would be willing to pay for the second option? Both machines have the same useful life of 11 years and the difference between their performances is negligible. Assume an annual interest rate of 4%. $767,524 $667,197 $456,197 $567,524arrow_forwardConsider a proposal to enhance production of tortillas en a taqueria. The new machine is estimated to cost $20 million and will incur an additional $1 million per year in maintenance costs. The machine will produce annual savings of $7 million each year. The Minimum acceptable rate of return (MARR) is 10% per year, and the study period is five years at which time the machine will be obsolete (worthless). What is the maximum (minimum) percentage of maintenance cost can change that reverse your decision? (write upto 4 decimals.)arrow_forward
- Question 4 Consider a proposal to enhance production of tortillas en a taqueria. The new machine is estimated to cost $30 million and will incur an additional $1 million per year in maintenance costs. The machine will produce annual savings of $6 million each year. The Minimum acceptable rate of return (MARR) is 11% per year, and the study period is five years at which time the machine will be obsolete (worthless). What is the maximum (minimum) value of maintenance cost that reverse your decision? Write 4 decimalsarrow_forwardA bridge is to be constructed now as part of a new road. Engineers have determined that current traffic volume on the new road will justify a two-lane road and a bridge at the present time. Because of the uncertainty regarding future traffic, the time at which the additional two lanes will be required is currently being studied. Two alternatives are being considered. Alternative 1 - One-stage construction: Build a four lane bridge right now for $360,000. Alternative 2 - Two-stage construction: Start with a two-lane bridge now for $170,000 and widen to four lanes later when traffic justifies. The future cost of widening the bridge to four-lanes at that time will be $170,000 plus an extra $23,000 for every year that widening is delayed. For example, if future widening is done at the end of year 7, the cost of widening at that time will be equal to $170,000 + 7x($23,000) = $331,000. The following estimates have been made of when widening to a four-lane bridge will be required: Pessimistic…arrow_forwardLockheed Martin is considering purchasing a new fine pitch machine to speed up the process in manufacturing Power Control Boards (PCBs). The initial cost of the machine is $125,000 and has a useful life of 15 years. There is no salvage value for the fine pitching machine. Since manufacturing would speed up so would the manual inspection step of the process and therefore labor costs are expected to be $4,000 per year. However, adding the new machine is expected to reduce rework costs of $15,000 per year. The MARR of the company is 3%. a. Calculate the IRR (internal rate of return) of purchasing the new fine pitch machine using interpolation. You must show your work. Hint: Use the MARR as a starting point. b. Calculate the IRR using an excel function. You must turn in an excel file. You can do this in google sheets as well. Hint: Use RATE or IRR. (5 points)c. Based on your calculations in (a) and (b) and the MARR stated in the problem is this a good investment?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