Faleye Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for an after-tax cost of $20,000, which will generate after-tax cash flows of $10,000 at the end of each of the next 6 years. Alternatively, the company can purchase equipment with an after-tax cost of $11,000 that can be used for 3 years and will generate after-tax cash flows of $10,000 at the end of each year (System B). If the company's WACC is 10% and both "projects" can be repeated indefinitely, which system should be chosen, and what is its EAA? Do not round intermediat calculations. Round your answer to the nearest cent. Choose Project -Select- whose EAA=$

Faleye Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for an after-tax cost of $20,000, which will generate after-tax cash flows of $10,000 at the end of each of the next 6 years. Alternatively, the company can purchase equipment with an after-tax cost of $11,000 that can be used for 3 years and will generate after-tax cash flows of $10,000 at the end of each year (System B). If the company's WACC is 10% and both "projects" can be repeated indefinitely, which system should be chosen, and what is its EAA? Do not round intermediat calculations. Round your answer to the nearest cent. Choose Project -Select- whose EAA=$

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

Mrs. Sally Selfish's company is considering a project that has a 10 year life and cost GHC 5000. It would save GHC 1.000 per year in operating cost and increase revenue by GHC 600 per year. It would be financed with a 10 year loan with an interest of 8% per year. The salvage value for the newly purchased equipment is zero. If the minimum annual rate of return (MARR) or hurdle rate is 14% and the tax rate is 25%, what is the net present value (NPV) of the project. Use the straight line method to calculate the depreciation.
An iron ore of 50x10^6 ton was produced during 15 years and has been sold for $100 per ton Estimate the required investment if 0.4 turnover ratio was considered. If produced ton costs $28, what would be the net present value of the project when 8% safe rate and 15% rate of return assuming that the Investment will be depreciated within 15 years?
Company X has $ 928203 in annual fixed costs. The primary product generates $ 7.79 in revenue per unit and has variable costs of $5.50. The annual breakeven quantity is units.
A new factory would require a fixed and variable production costs of 325500000 $. It is estimated that variable costs of production will amount to 21% of the cash cost of production, and annual depreciation costs are estimated to be 12% of the fixed and variable production. If the annual profit are going to be 500000 $ million, determine the quality percent return on the entire cost and the minimum payout period.
XYZ Corporation manufactures book cases that it sells for P65 each. It costs XYZ P35000/year to operate its plant. This sum includes rent, depreciation charges on equipment and salary payments. If the cost to produce one book case is P50, how many case must be sold each year for XYZ to avoid taking loss? Select the correct response: 2334 2336 2335 2333
A steam generation system at a biomass-fueled power plant uses an electrostaticprecipitator (ESP) to clean its gaseous effluents. The power plant has consistently made use ofthe same type of ESP over the past several years. The installed cost of a new ESP has beenrelatively constant at $100,000. Records of operation and maintenance expenses indicate thefollowing average expenses per year as a function of the age of the ESP. The MVs of the ESP arealso reasonably well known as a function of age. Data graph in image attached. Determine the best time to replace the ESP if the MARR is 15% per year.
Engineering Economics 0016 Please provide a step by step solution using PW method
Vilas Company is considering a capital investment of $198,900 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $13,923 and $51,000, respectively. Vilas has a 12% cost of capital rate, which is the required rate of return on the investment. Click here to view the factor table. (a) Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.) Cash payback period Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 10.52%.) Annual rate of return (b) years Net present value % Using the discounted cash flow technique, compute the net present value. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer for present value to 0…
A fabrication company engaged in production of a motor part has a production capacity of 700, 000 pieces per year. But, it is just operating at 62% of its full capacity due to unavailability to finance the importation of their materials. The company has an annual income of P 430, 000.00, annual fixed cost are P 190, 000.00 and variable costs are P 0.348 per unit. How many productions of parts must be produced for break-even point? Given:Required:Solution:
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
A chemical plant worth P 110M has an estimated life of 6 years and a projected scrap value of P 10M. after 3 years of operation an explosion made it a total loss. How much money would have to be raised to put up a new plant costing P 150M, if depreciation reserved had been maintained during its 3 years of operation by Sinking Fund Method at 6%?
An investment of P 270,000 can be made in a project that will produce a uniform annual revenue of P 185,400 for 5 years and having a salvage value of 10% of the investment. Out of pocket costs for operation and maintenance will be P 81,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn not less than 25% before income taxes. Determine the payout period of this investment.