The replacement of a planning machine is being considered by the Reardon Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $25,000for installation and will have an estimated economic life of 14 years and a $1,500 MV at that time. It is estimated that annual expenses will average $16,000 per year. The defender has a present BVof $5,500 and a present MV of $4000. Data for the defender for the next three years are given below. Using a before-tax interest rate of 12% per year, make a comparison to determine whether it iseconomical to make the replacement now.Year MV at End of BV at End of Expenses duringYear1$3,000Year$4,125the Year$20,00022,7502,75026,00032,5001,37532,000Click the icon to view the interest and annuity table for discrete compounding when i = 12% per year.Fill in the table for the EUAC values for the defender for years 1-3. (Round to the nearest dollar.)YearEUAC123

Step 1: To compare the two options, we can calculate the equivalent uniform annual cost (EUAC) for…

Answered: The replacement of a planning machine…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The replacement of a planing machine is being considered by the Reardorn Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $30,000 for installation and will have an estimated economic life of 12 years and a $2,000 MV at that time. It is estimated that annual expenses will average $16,000 per year. The defender has a present BV of $6,000 and a present MV of $4,000. Data for the defender for the next three years are as follows: MV at End of BV at End of Expenses during the Year Year Year Year $3,000 2,500 $4,500 3,000 1,500 $20,000 25,000 30,000 1 2 3 2,000 Using a before-tax interest rate of 15% per year, make a comparison to determine whether it is economical to make the replacement now.
A construction firm needs a new small loader. It can be purchased for $20,000. The firm expects the loader to have a salvage value of $5,000 after 7 years. The maintenance cost will be $1,400 each year. The firm's interest rate is 8% per year. Compute the Equivalent Uniform Annual Worth (EUAW). EUAW = EUAB - EUAC Submit the absolute value of your answer (positive value). Margin of error: +/- 50
The following tables show the marginal costs of a defender over its remaining four years of service life. If the challenger's minimum EUAC is $29,403, what is the most appropriate replacement decision? Year 1234 Marginal cost $31,053 $26,353 $28,003 $32,803 ○ A. No decision can be made unless additional calculations are made on the challenger B. Replace the defender now OC. No decision can be made unless additional calculations are made on the defender ○ D. Keep the defender for at least one more year
From the data shown, determine the ESL of the challenger. Years Retained 1 2 3 4 5 AW of the Defender, $ -145,000 -106,000 -95,000 -93,000 -96,000 a) n = 2 years b) n = 1 year c) n = 3 years d) n = 4 years e) n = 5 years AW of the Challenger, $ -136,000 -126,000 -99,000 -95,000 -98,000
An existing robot can be kept if $2,000 is spent now to upgrade it for future service requirements. Alternatively, the company can purchase a new robot to replace the old robot. The following estimates have been developed for both the defender and the challenger. Defender Challenger Current MV…
: A machine was purchased and installed 6 years ago for $50000 with a useful life of 10 years. The salvage value is now $5500 and decreasing at a rate of $500 per year. The machine has a maintenance cost of $2000 per year. Assuming a 12.4% MARR, should the company replace the machine this year with a potential new machine that has a EUAC of $3000 per year? (show your work)
Economics A commercial 3D printer is purchased for $310,000. The salvage value of the printer decreases by 45% each year that it is held. The cost to operate and maintain the machine the first year it is used is $12,000; these costs increase by $5,500 each year. What is the optimal replacement interval and minimum EUAC for the printer, assuming a MARR of 11% is used? ORI: years EUAC*: $
A Civil Engineer is considering establishing his own company. An investment of $4,000,000 will berequired, which will be recovered in 15 years.It is estimated that revenue will be $8,000,000 per year and that operating expenses will be as follows:Materials $1,600,000 per yearLabor $2,800,000 per yearOverhead $400,000 + 10% of the yearly revenueOther expenses $600,000 per yearThe engineer will give up his regular job paying $2,160,000 per year and devote his time fulltime to theoperation of the business; this will result in decreasing labor costs by $400,000 per year, material costs by$280,000 per year and overhead cost by $320,000 per year. If the man expects to earn at least 20% ofhis capital, should he invest? NOTE: Use Future Worth Method.
A Civil Engineer is considering establishing his own company. An investment of $4,000,000 will berequired, which will be recovered in 15 years.It is estimated that revenue will be $8,000,000 per year and that operating expenses will be as follows:Materials $1,600,000 per yearLabor $2,800,000 per yearOverhead $400,000 + 10% of the yearly revenueOther expenses $600,000 per yearThe engineer will give up his regular job paying $2,160,000 per year and devote his time fulltime to theoperation of the business; this will result in decreasing labor costs by $400,000 per year, material costs by$280,000 per year and overhead cost by $320,000 per year. If the man expects to earn at least 20% ofhis capital, should he invest? NOTE: Use Annual Worth Method.
An engineer calculated the AW values shown for retaining a presently owned machine additional years. A challenger has an ESL of 4 years with AW = $-60,000 per year. Assuming all future costs remain the same, when should the company replace the defender? The MARR is 12% per year. Assume used machines like the one presently owned will always be available. AW of Defender, 24 -77,000 -63,000 Years Retained 1 12 -58,000 -64,000 -70,000 13 4 a) at year 5 b) at vear 2 always be available. AW of Defender, 2$ |-77,000 -63,000 -58,000 -64,000 -70,000 Years Retained 3 4 15 O a) at year 5 b) at year 2 c) at year 1 d) at year 4 e) at year 3
(Chapter 13) A $20,000 machine will be purchased by a company with an MARR of 10%. It will cost $5,000 to install and removal costs are insignificant. What is its economic life and minimum EUAC cost given the following O&M costs: YR, n 1 2 3 4 5 O&M $5,000 $8,000 $11,000 $14,000 $17,000
uppose that you purchased a HVAC system five years ago for $75, 000. The O&Mcosts are $15, 000 this year and are expected to increase by $1, 000 each year for the next five yearsthen remain the same for the following years.The current salvage value of the system is $15, 000; salvage value after one year is estimated tobe $12, 000; after two years, $11, 000; after three years, $10, 000; after four years, $9, 000; and so on.A new industrial HVAC system is available for purchase at a price of $95, 000, including instal-lation. The market value of the new system will decrease at a rate of 15% each year. The O&Mcosts are expected to be $1, 000 in the first year, and will increase at a rate of 20% each year. Themaximum service life of the new system is 10 years. Assume that your company uses an interestrate of 10% for all project evaluations.(a) Find the remaining economic life of the currently owned asset.(b) What is the economic service life of the new system?(c) Use the…

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