Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 9, Problem 3ST
(a):
To determine
Calculate the taxable income.
(b):
To determine
Calculate the taxable gain.
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Question 6.2
You purchased an industrial oven five years ago for $80,000. O&M costs
were $20,000 for this year but are expected to increase by $750 each year for the next five years.
The current salvage value of the oven is $40,000 but expected to decrease by 10% in each of the
following years of use (e.g. $36,000 after one year, $32,400 after two years, so on). At i = 10%,
find the remaining economic life for this asset.
A) 1 year
B) 2 years
C) 3 years
D) Answers A, B and C are not correct
Acme-Denver Corporation is considering the replacement of an old, relatively inefficient surface-grinder machine that was purchased seven years ago at a cost of $12,000. The machine had an original expected life of 10 years and a zero estimated salvage value at the end of that period. The current market value of the machine is $2,000. The divisional manager reports that a new machine can be bought and installed for $14,000. Over its five-year life, this machine will expand sales from $10,000 to $12,500 a year and, furthermore, will reduce labor and raw materials usage sufficiently to cut annual operating costs from $7,000 to $5,000. The new machine has an estimated salvage value of $4,000 at the end of its five-year life. The firm's MARR is 12%.(a) Should the new machine be purchased now?(b) What current market value of the new machine would make the two options equal?
An equipment cost $90.000 initially. The market value the first year was 80,000
and has been declining at the rate of $6.000 yearly. The O & M costs in year 1
were $7.000 and have been increasing by $2.000 from year 2. Determine the
minimum cost life of this equipment for a MARR of 10 %.
Based on the chart below,
a. what is the economic life of this piece of equipment.
b. What is the minimum economic cost?
OM cost PWCost
Year
Cost
Salvage
EUAC
90000
1
7000
$96,363.64
80000
($26,000.00)
9000
$103,801.65
74000
(524.571.43)
3
11000
$112,066.12
68000
($24.519.64)
4
13000
$120,945.29
62000
($24.795.52)
15000
$130,259.11
56000
($25,189.37)
6
17000
$139,855.17
50000
(525.631.41)
7
19000
$149.605.17
44000
(526.091.88)
8
21000
$159,401.83
38000
($26,556.05)
9.
23000
$169,156.07
32000
($27,015.85)
10
25000
$178,794.65
26000
(527.466.63)
O a. 6 years b. $27,466.63
O a. 8 years b. $80.000
O a. 3 years b. $25,519.64
O a. 10 years b. $24.664.99
Chapter 9 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - Prob. 8PCh. 9 - Prob. 9PCh. 9 - Prob. 10P
Ch. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - Prob. 13PCh. 9 - Prob. 14PCh. 9 - Prob. 15PCh. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 21PCh. 9 - Prob. 22PCh. 9 - Prob. 23PCh. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Prob. 26PCh. 9 - Prob. 27PCh. 9 - Prob. 28PCh. 9 - Prob. 29PCh. 9 - Prob. 30PCh. 9 - Prob. 31PCh. 9 - Prob. 32PCh. 9 - Prob. 33PCh. 9 - Prob. 34PCh. 9 - Prob. 35PCh. 9 - Prob. 36PCh. 9 - Prob. 37PCh. 9 - Prob. 38PCh. 9 - Prob. 39PCh. 9 - Prob. 40PCh. 9 - Prob. 41PCh. 9 - Prob. 42PCh. 9 - Prob. 43PCh. 9 - Prob. 44PCh. 9 - Prob. 45PCh. 9 - Prob. 46PCh. 9 - Prob. 47PCh. 9 - Prob. 48PCh. 9 - Prob. 49PCh. 9 - Prob. 50PCh. 9 - Prob. 51PCh. 9 - Prob. 52PCh. 9 - Prob. 53PCh. 9 - Prob. 1STCh. 9 - Prob. 2STCh. 9 - Prob. 3STCh. 9 - Prob. 4ST
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