A CNC mill was purchased 4 years ago for $60,000. Even though it is still a productivemachine, a better machine is now on the market that can be bought for $80,000. The new machinewill increase the benefit by reducing the annual operating costs. Operating cost and book values areshown below for both machines. (MARR=15%)Obtain the EAC of capital cost and EAC of operating cost for both defender and challenger over theyears and draw the curves in Excel including the EAC of total costs.Obtain the economic life associated with the minimum EAC of total costs for both defender andchallengerIs it worth replacing the machine if the machine is required only for the next 4 years?DefenderChallengerYearOp. Cost ($) Book Value ($) Op. Cost ($) Book Value ($)32,00080,000420024,00070068,000450015,000110061,000349007,500150056,000452002,500190052,0005230040,0006270020,000

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Required information For equipment that has a first cost of $17,000, the estimated operating costs and year-end salvage values are as shown. Year Operating Cost, $ Salvage Value, $ 1 -1,000 7,000 2 -1,200 5,000 3 -1,300 4,500 4 -2,000 3,000 5 -3,000 2,000 Write the PMT function to determine AW for year 4, if net operating costs are entered into cells B2 through B6. (Please upload your response/solution using the controls below.)
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PRO Engineering is considering whether to purchase or lease a piece of earthmoving equipment.The data associated with the purchase are as followsInitial cost = $150,000Residual value = $12,000Maintenance cost = $1,800/per yearOperator cost per day = $300/dayIf the equipment is rented, the operator cost is incurred, at the rate of $300 per day and $100 for the daily rental of the equipment.Determine the minimum number of days per year the equipment must be used to justify the purchase. Use an interest rate of 7%
Ima Good-Student enrolls in ENGR 3202. She had considered purchasing a new vehicle but decides that she can buy a good used vehicle and invest the difference in the stock market. Ima sells her current vehicle for $5000 and buys a low-mileage vehicle for $15000 in cash, no financing needed. She also realizes that she needs to account for maintenance and operation costs. Those costs are estimated to be $2000 per year and increase by $100 per year. She will keep the vehicle for years and sell it for an estimated $3000. If her MARR is 8%, what is the present value of this cash flow? O a. $-23000 O b. $-23400 O c. $-18000 O d. -$18400
• Smalltown, PA currently has a $38,000/year contract with a private company to transport students to their school and back. Smalltown can buy a bus for $40,000 that will be adequate for the next 5 years. Operating and maintenance costs are estimated to be $25,000 per year. At the end of 5 years, the bus will have an estimated salvage value of $5,000. Their MARR is 10%/year. а. What is the Excel or closed form equation (along with the value of relevant parameters) to determine this investment's internal rate of return?
A specialty concrete mixer used in construction was purchased for $300,000 7 years ago. Its annual O&M costs are $105,000. At the end of the 8-year planning horizon, the mixer will have a salvage value of $5,000. If the mixer is replaced, a new mixer will require an initial investment of $375,000 and at the end of the 8-year planning horizon, the new mixer will have a salvage value of $45,000. Its annual O&M cost will be only $40,000 due to newer technology. Use an EUAC measure and a MARR of 15% to see if the concrete mixer should be replaced if the old mixer is sold for its market value of $65,000. Solve, a. Use the cash flow approach (insider’s viewpoint approach). b. Use the opportunity cost approach (outsider’s view point approach).
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Given the following two alternatives and using the repeatability assumption and MARR=15%/year, the equation for computing the present worth of vendor B is Vendor A First Cost, $ -15,000 Annual cost, $ per year -3500 Salvage Value, $ 1000 Life, years 3 Vendor B -18000 -3100 2000 4 OPW=18000-18000(P/F,15%, 4)-18000(P/F,15%, 8)+2000(P/F, 15%, 4)+2000(P/F, 15%, 8) +2000 (P/F, 15%, 12)-3100(P/A, 15%, 12) PW=18000-18000(P/F, 15%, 12)+2000(P/F, 15%, 4)+2000 (P/F, 15%, 8)+2000(P/F, 15%, 12)-3100(P/A, 15%, 12) O PW=-18000-18000(P/F,15%, 4) - 18000(P/F,15%, 8) +2000(P/F, 15%, 4)+2000(P/F, 15%, 8) +2000 (P/F, 15%, 12)-3100(P/A, 15%, 12) O PW=-18000(P/F,15%, 4) -18000(P/F,15%, 8) +2000(P/F, 15%, 4)+2000(P/F, 15%, 8) +2000(P/F, 15%, 12)-3100(P/A, 15%, 12)

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