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- The Ham and Egg Restaurant is considering an investment in a new oven that has a cost of $60,000, with annual net cash flows of $9,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether or not you would recommend that Ham and Egg invest in this oven.A new machine can be purchased for $50,000. Its expected useful life is seven years, with a salvage value of $5,000. Annual revenues will be $22,000 per year and annual expenses will be 8,000 per year, over the seven-year study period. If the MARR is 10%, determine whether the offer should e accepted. O a. Acceptable and its AW = $4257 O b. Not acceptable and its AW = $2,345 O. Acceptable, and its AW = $5067 O d. Not acceptable and its AW = -$3,281Emerson Electric manufactures compressors for air conditioners. It needs replacement equipment to improve one of its manufacturing lines. Select between two options using the MARR of 14% per year and a future worth analysis for the expected use period. What are the future values of each option? Option First cost, S A B -64,000-76,000 -16,000-22,000 AOC, $ per year Expected salvage value 8,000 11,000 Expected use, years 3 6
- Lesego Ltd is considering an investment in a new machine for the production of a new product, X. There are two possibilities, Machine A and Machine B. Both product X and the machine would have an expected life of five years.The following information is available:Product X Selling price $50Variable cost 32Increase in fixed overhead (excluding depreciation of the new machine) is $90,000 per year.YearSales units 1 10,0002 15,0003 20,0004 20,0005 5,000 Machine A Machine BInitial cost ($000) 550 480Residual value 50 30The company’s cost of capital is 10%,Required:Evaluate each machine, using the following methods:Accounting rate of return Payback;Net present value. Discuss the importance of capital budgeting in organisations.Halcrow, Inc., expects to replace adowntime tracking system currently installedon CNC machines. The challenger systemhas a first cost of $70,000, an estimatedannual operating cost of $20,000, a maximumuseful life of 5 years, and a $10,000 salvagevalue anytime it is replaced. At an interest rateof 10% per year, determine its economicservice life and corresponding AW value.Work this problem using a hand calculator.An engineer with Haliburton calculated the AW values shown for retaining a presently owned machine additional years. A challenger has an economic service life of 7 years with AW = $-86,000 per year. Assuming all future costsremain as estimated for the analysis, (a) when should the company replace the defender and with what machine, and (b) when should the companypurchase the challenger? The MARR is 12% per year. Assume used machines like the one presently owned will always be available.
- A new heating system is to be purchased and installed for $110,000. This system will save approximately 300,000 kWh of electric power each year for a 6-year period with no additional 0&M costs. Assume the cost of electricity is $0.10 per kWh, and company's MARR is 15% per year, and the market value of the system will be $8,000 at EOY 6. Using the PW method, is this a good idea?Two types of power converters are under consideration for a specific application. An economic comparison is to be made using a MARR of 10% and the following cost estimates: Alternative Model A Model B Service Life (Years) 5 10 First Cost $10,000 $20,000 Salvage Value 0 5,000 Annual Operating Cost 2,500 1,200 Draw the Cash Fiow Diagram for each alfernative covering the entire analysis period. Compute the Net Present Worth for Model A? Compute the Net Equivalent Uniform Annual Worth for Model A? Which of these alternatives should be selected?The initial investment cost of machine A is $ 9,000 and the useful life of the machine is 6 years and annually.operating costs are $ 5,000. The initial investment cost of machine B is 16.000 $ and 9 yearsAt the end of its useful life, the machine can be sold for $ 4,000. Operation of machine BSince their cost is $ 4,000 per year, the alternative lifetimes of the machines areBased on an analysis time as much as a solid (EKOK), two machines according to the present value analysis.compare. Interest rate 10% per year (Answer: MSD (A) = 57,954 $; MSD (B) = 53,175 $)
- You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a present worth comparison at an interest rate of 13% per year? Why is yours the correct choice? Alternative First Cost X $-45,000 Maintenance cost, per $-9000 Year Salvage Value $1,000 Life 5 years Y $-55,000 $-4000 $6,500 5 years The present worth of alternative X is $ 13888 and that of alternative Y is $ 44459.4 Alternative X is selected by the company.Salalah Methanol Co. has bought some new machinery at a cost of 1250000 OMR. The impact of the new machinery will be felt in the additional annual cash flows of 375000 OMR over the next five years. What is the payback period for this project? If their acceptance period is three years, will this project be accepted? Select one: O a. 3.84 years, no O b. 2.82 years, yes O c. 2.53 years, yes O d. 3.33 years, no O e. None of theseUse the following for the next 2 questions: A facility is to be built with construction costs of $50 per square foot amortized over 20 years. Receiving and put-away costs are expected to be $0.02 per box and pick-pack-ship costs are expected to be $0.10 per box. The facility will have an annual upkeep and maintenance cost of $5 per square foot. 1. If the company constructs a 100,000 square foot facility, what is the monthly fixed cost? - $102.500 - $62,500 - $92,500 - $112,500 - $82,500 - $52,500 - $72,500 2. If demand in April is 30,000 boxes, what is the variable cost in April? (assume the number of boxes received in April equals the number of boxes shipped in April) - $3,000 - $1,200 - $3,600 - $2,400 - $600 - $4,200