4. A company is planning to invest $40,000 on a milling machine at year 0. The net cash flows generated from year 1 to year 6 is: $8000, and $10,000 equally in the following 5 years. The machine needs to be maintained at an annual cost of $2000. The machine has a 6-year service life and can be resold at the price at $6000 then. The MARR is 12%. (a) Draw the cash flow diagram. b) Determine the equivalent present and annual revenue of the machine. c) Determine the annual cost of owning the machine. d) Determine if this is a good investment using AE.

4. A company is planning to invest $40,000 on a milling machine at year 0. The net cash flows generated from year 1 to year 6 is: $8000, and $10,000 equally in the following 5 years. The machine needs to be maintained at an annual cost of $2000. The machine has a 6-year service life and can be resold at the price at $6000 then. The MARR is 12%. (a) Draw the cash flow diagram. b) Determine the equivalent present and annual revenue of the machine. c) Determine the annual cost of owning the machine. d) Determine if this is a good investment using AE.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Problem #2: (2/10) Seema is looking at an investment in upgrading an inspection line at her plant. The initial cost would be $300,000 with a salvage value of $50,000 after 5 years. Use the capital recovery formula to determine how much money must be saved every year to justify the investment at 8% interest rate.
Referring to the following cumulative cash flow diagram, salvage value is most nearly 3M 10 ERY -IM $500000 $1M $750000 - s'NOILIGOd HSV)
Please fill out the spaces and answer the questions. Use table provided.
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Unit Sales 100,500 112,500 135,500 141,500 94,500 Year 1 2 3 4 5 The new system will be priced to sell at $470 each. The cockroach eradicator project will require $2,100,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $340, and total fixed costs are $2,400,000 per year. The equipment necessary to begin production will cost a total of $22 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost. The relevant tax rate is 35%, and the required return is 16%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV $…
A junior PM determines the present worth of a project to be $56,417. He misplaced the full set of calculations but knows that the project lasts 5 years with a first cost of $180,000, and a set of equal cash flows at the end of each year. MARR used was 10%. What is the IRR for this project?
Economics A new machine can be purchasedfor$80,000. Its expecteduseful life is 5 years, at which time its market value will be $6,000. Annual revenues less expenses dueto the new machine will be $20,000 per year overthefive-year period. Assume a MARR of 10% to determine if this is a good investment by using. a) the PW method b)the FW method c) the AW method d) The IRR method e) The ERR method
A $2500 computer system can be leased for $79 per month for 3 years. After 3 years, it can be purchased for $750. This is also the salvage value if the system was purchased originally. What is the effective annual rate for leasing the computer? Ans. r = 1.75% and Effective Annual Annual Rate = 23.1% Please shows the formula used dont make a shortcut answer. Provide full detailed solution.
A transit system is considering buying 6 more buses to provide better service. It will cost $100,000 for buying a new bus and $15,000 per year for maintenance and operation for the following 8 years. If the city’s MARR is 8%, what is the equivalent uniform annual cost of this project? Assume the bus has no value at the end of 8 years.
Consider the following EOY cash flows for two mutually exclusive alternatives (one must be chosen). The MARR is 10% per year. Capital investment Annual expenses Useful life Market value at end of useful life The PW of the Lead Acid is $ The PW of the Lithium Ion is $ Lead Acid Lithium Ion $12,000 $2,200 Lithium Ion Lead Acid $7,000 $2,500 Click the icon to view the interest and annuity table for discrete compounding when i = 10% per year. (Round to the nearest dollar.) (Round to the nearest dollar.) 12 years $0 (a) Determine which alternative should be selected based on the PW method. Assume repeatability and use a study period of 36 years. 18 years $2,800 Which alternative should be selected? Choose the correct answer below.
Determine the minimum cost life (in years) of an equipment for which the marginal costs are given in table below. Use an interest rate of 10%. Year 1 2 3 4 5 6 Marginal 18,000 16,000 19,000 20,000 22,000 24,000 Cost , $ Answer: The minimum cost life of an equipment is year(s).
A cutting-edge product of Continental Fan had the following net cash flow series during its first 5-year period on the market. Find all rate of return values between 0% and 100%. (Round the final answer to three decimal places.) Year 0 1 2 3 45 5 The rate of return is %. Net Cash Flow, $ -54,000 37,000 29,000 10,000 -5,000 13,000