ent power failure of Ceramics Plant, a disbursement a day would be $3,500. To avoid future power failures, it is recommended to purchase a standby machine for $30,000 which is estimated to have a useful life of 14 years, $7,000 salvage value at the end of this time. Previous records illustrate normal power failure of 4 days each year. Annual maintenance and operation would cost $3,200 for 4 days. Minimum required rate of return is 17%. Will you recommend

ent power failure of Ceramics Plant, a disbursement a day would be $3,500. To avoid future power failures, it is recommended to purchase a standby machine for $30,000 which is estimated to have a useful life of 14 years, $7,000 salvage value at the end of this time. Previous records illustrate normal power failure of 4 days each year. Annual maintenance and operation would cost $3,200 for 4 days. Minimum required rate of return is 17%. Will you recommend

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 2CE

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A new bottle-capping machine costs 64,000, including 8,000 for installation. The machine is expected to have a useful life of eight years with no salvage value at that time (assume straight-line depreciation). Operating and maintenace costs are expected to be 4,000 for the first year, increasing by 1,500 each year thereafter. Interest is 13%. Construct a spreadsheet that has the following headings: Year, Salvage Value, Maintenance Costs, EAC (Capital Costs), EAC (Operating Costs), and EAC (Total Costs). Compute the EAC (Total Costs) if the bottle capper is kept for n years, n = 1,...,8. What is the economic life of the bottle capper (in years)? Number Complete the row of the table indicating the economic life for this project NOTE: Use 5 significant figures in your calculations, and round your answers for the table below to the nearest dollar. Year Number Salvage Number Maintenance Number EAC Capital Number EAC Maintenance Number EAC Total Number
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A company is considering buying a new bottle-capping machine. The initial cost of the machine is $1.2M and it has a 10-year life. Monthly maintenance costs are expected to be $2000 per month for the first 7 years and $2500 per month for the remaining years. The machine requires a major overhaul costing $100,000 at the end of the fifth year of service. Assume that all these costs occur at the end of the appropriate period. (a) What is the future value of all the costs of owning and operating this machine if the nominal interest rate is 9% compounded monthly? (b) Bottle caps are in the top 10 items found in beach cleanups. What are other items on such lists, and what are beach cities doing to reduce this debris?