ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- DBS Builders Pte Ltd purchased an asphalt paver eight years ago for $280,000. The estimated operation and maintenance (O&M) costs for the next three years are $56,000, $68,000, and $82,000, respectively. The asphalt paver can be sold for $65,000 now, for $57,000 next year, for $45,000 two years from now, and for $28,000 three years from now. 4. The latest asphalt paver in the market costs $290,000 and has an estimated service life of five years. The salvage value is estimated to be $50,000 after five years. The expected annual O&M costs will be $6,000 for the first year and increase by $3,800 per year thereafter. If a before-tax minimum attractive rate of return (MARR) of 12% is estimated, what replacement decision should DBS Builders make?arrow_forwardUsing the asset description and table below, find the economic service life (ESL) of the asset, assuming MARR = 8%. The company is committed to using the asset for the upcoming year, but is unsure about the following years. Today's market value is $70,000, and it will last another 4 years before failure. Each year, the after-tax market value decreases by $10,000. The operating cost of the asset in year 1 is expected to be $30,000, and it will increase by $5,000 each year through year 4. a. 3 yearsb. 1 yearc. 4 yearsd. 2 yearsarrow_forwardAn industrial organization has established an automated assembly line (for $360,000) that will reduce labor costs by $56,000 each year for 10 years. The Internal Revenue Service has ruled that you must depreciate the assembly line on a Straight Line (SL) basis with a depreciable life of 10 years. After-tax MARR is 10% per year. The effective income tax rate is 25%. After 10 years, the machine will have zero salvage value. a) Draw a table showing Before Tax Cash Flow (BTCF) and After-Tax Cash Flow (ATCF). b) Calculate the after-tax PW and IRR. (Use interpolation method to find IRR). Is it feasible?arrow_forward
- help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all workingarrow_forwardThe Smith and Jones Research and Development firm has bought a new laboratory equipment (MACRS-GDS 3-year property class) to be used in a research project that will last 3 years. The cost of equipment is $750,000 but require bringing a technician to install the equipment and train the personal with an additional cost of $75,000. The equipment’s supplier will buy back the equipment at the end of the project for $50,000. The O&M costs per year incurred by the equipment are $70,000. The firm signed a contract with the DOD that states that they will receive a one lump-sum of $Y at the end of the life of the research project that will generate a rate of return of 8%. The firm will finance the equipment with a loan at 6% interest rate per year, and considering that the firm will not generate any revenue until the end of year 3, the bank has agreed that principal and accrued interests will be paid at the end of year three. Perform an ATCF analysis to determine the value of Y$ that will…arrow_forwardA small pump costs $24,000 and has a life of 8 years and a $1,400 SV at that time. If the 150% DB method is used to depreciate the pump, what is the BV at the end of year three? ..... Choose the correct answer below. O A. The BV at the end of year three is $13,624. B. The BV at the end of year three is $3,000. C. The BV at the end of year three is $4,558. D. The BV at the end of year three is $12,873.arrow_forward
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