Engineering Economy, Student Value Edition (17th Edition)
17th Edition
ISBN: 9780134838137
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Chapter 9, Problem 9P
To determine
Replacement of the defender.
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The replacement of a planning machine is being considered by the Reardorn Furniture Company. (There is an indefinite future need for this type of machine.) The
best challenger will cost $30,000 for installation and will have an estimated economic life of 11 years and a $2,000 MV at that time. It is estimated that annual
expenses will average $15,500 per year. The defender has a present BV of $6,000 and a present MV of $3500. Data for the defender for the next three years are
given below. Using a before-tax interest rate of 10% per year, make a comparison to determine whether it is economical to make the replacement now.
Year MV at End of BV at End of Expenses during
Year
Year
the Year
$18,000
25,000
S- 1,500
$4,500
2
- 1,750
3,000
3
-2,000
1,500
32,000
Click the icon to view the interest and annuity table for discrete compounding when i 10% per year.
Fil in the table for the EUAC values for the defender for years 1-3. (Round to the nearest dollar.)
Year
EUAC
$25350
$24755
3
$ 25758
The replacement of a planning machine is being considered by the Reardorn Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $32,000
for installation and will have an estimated economic life of 11 years and a $1,800 MV at that time. It is estimated that annual expenses will average $16,000 per year. The defender has a present BV
of $6,000 and a present MV of $3500. Data for the defender for the next three years are given below. Using a before-tax interest rate of 12% per year, make a comparison to determine whether it is
economical to make the replacement now.
MV at End of BV at End of Expenses during
Year
Year
the Year
$ - 1,500 $4,500
$18,000
- 2,000
3,000
1
2
22,000
3
- 2,500
1,500
26,000
Click the icon to view the interest and annuity table for discrete compounding when i = 12% per year.
Year
Fill in the table for the EUAC values for the defender for years 1-3. (Round to the nearest dollar.)
Year
1
2
3
EUAC
$
$
SA
The replacement of a planning machine is being considered by the Reardon Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $25,000
for installation and will have an estimated economic life of 14 years and a $1,500 MV at that time. It is estimated that annual expenses will average $16,000 per year. The defender has a present BV
of $5,500 and a present MV of $4000. Data for the defender for the next three years are given below. Using a before-tax interest rate of 12% per year, make a comparison to determine whether it is
economical to make the replacement now.
Year MV at End of BV at End of Expenses during
Year
1
$3,000
Year
$4,125
the Year
$20,000
2
2,750
2,750
26,000
3
2,500
1,375
32,000
Click the icon to view the interest and annuity table for discrete compounding when i = 12% per year.
Fill in the table for the EUAC values for the defender for years 1-3. (Round to the nearest dollar.)
Year
EUAC
1
2
3
Chapter 9 Solutions
Engineering Economy, Student Value Edition (17th Edition)
Ch. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - A city water and waste-water department has a...Ch. 9 - Prob. 9PCh. 9 - Prob. 10P
Ch. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - Use the PW method to select the better of the...Ch. 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. 27SECh. 9 - Prob. 28SECh. 9 - Prob. 29CSCh. 9 - Prob. 30CSCh. 9 - Prob. 31CSCh. 9 - Prob. 32FECh. 9 - Prob. 33FECh. 9 - Prob. 34FECh. 9 - Prob. 35FECh. 9 - Prob. 36FE
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Similar questions
- A replacement study is to be performed on certain pressing equipment in an industrial laundry. The challenging asset has a computed AW of –$41,000 at i = 15% per year for its anticipated 10-year life. The defender can be sold now for $32,000 or kept for a maximum of 4 more years. If kept, the data below will apply to the defender. Additional years retained Operating Cost, $ EOY Salvage value, $ 1 34,000 28,000 2 36,000 22,000 3 38,000 15,000 4 40,000 5,000 a. In what year should the company replace the existing equipment with the challenger, assuming existing equipment can be replaced indefinitely with similar used equipment having the same AW as that currently used. (now, 4 years from now, 3 years from now, 2 years from now) b. What is the minimum economic life of the defender? (1 year, 4 years, 3 years, 2 years)arrow_forwardA commercial 3D printer is purchased for $ 380,000. The salvage value of the printer decreases by 35% each year that it is held. The cost to operate and maintain the machine the first year it is used is $ 12,500; these costs increase by $ 4,000 each year. What is the optimal replacement interval and minimum EUAC for the printer, assuming a MARR of 10% is used?arrow_forwardA commercial 3D printer is purchased for $280,000. The salvage value of the printer decreases by 40% each year that it is held. The cost to operate and maintain the machine the first year it is used is $12,000; these costs increase by $4,500 each year. What is the optimal replacement interval and minimum EUAC for the printer, assuming a MARR of 13% is used? Click here to access the TVM Factor Table Calculator. ORI: EUAC*: $ years Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is ±5 for the EUAC*.arrow_forward
- An $80,000 baling machine for recycled paper was purchased by the XYZ company two years ago. The current MV of the machine is $50,000, and it can be kept in service for seven more years. MARR is 12% per year and the projected net annual receipts (revenues less expenses) and end-of-year market values for the machine are shown below. When is the best time for the company to abandon this project? END OF YEAR 1 2 3 4 5 6 7 Net annual receipts $20,000 $20,000 $18,000 $15,000 $12,000 $6,000 $3,000 Market value 40,000 32,000 25,000 20,000 15,000 10,000 5,000arrow_forwardtwooooarrow_forwardA machine for refining operation was purchased 7 years ago for 160,000 SAR. Last year a replacement study was performed with the decision to retain it for 3 more years. The situation has changed . The equipment is estimated to have a value of 8,000 SAR now or anytime in the future. If kept in service, it can be minimally upgraded at a cost of 43,000 SAR which will make it usable for up to 2 more years. Its operating cost is expected to be 22,000 SAR the first year and 25,000 SAR the second year.arrow_forward
- An existing robot can be kept if $2,000 is spent now to upgrade it for future service requirements. Alternatively, the company can purchase a new robot to replace the old robot. The following estimates have been developed for both the defender and the challenger. Defender Challenger Current MV…arrow_forwardFrom the data shown, determine the ESL of the challenger. Years Retained 1 2 3 4 5 AW of the Defender, $ -145,000 -106,000 -95,000 -93,000 -96,000 a) n = 2 years b) n = 1 year c) n = 3 years d) n = 4 years e) n = 5 years AW of the Challenger, $ -136,000 -126,000 -99,000 -95,000 -98,000arrow_forwardA machine tool purchased 2 years ago for $40,000 has a market value best described by the relation $40,000 − 3000k, where k is the number of years from time of purchase. Experience with this type of asset has shown that its annual operating cost is described by the relation $30,000 + 1000k. The asset’s salvage value was originally estimated to be $10,000 after a predicted 10-year useful life. Determine the current estimates for P, S, and AOC for a replacement study, assuming it will be kept only 1 more year, which will be the third year of ownership.arrow_forward
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