Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 10P
To determine
Calculate the present worth.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A toy manufacturing company works on three types of models, each of which could be produced on the same machine. The detailed information is shown in the table below. The company operates 200 days per year, with two 8-hour shifts, and requires a 15% capacity cushion for each machine to allow for preventive maintenance, breakdowns, and other unforeseen circumstances. Currently they have two machines. How many additional machines will be required to fulfill the predicted annual demand? You need to show the details for calculating demand, supply, and the number of machines needed to get full credit.
Job Type
Model A
Model B
Model C
Demand (units/year)
6000
4000
5000
Process time (hours/unit)
.8
.75
.25
Average lot size (unites/lot)
40
100
50
Set time (hours) per lot
1.0
1.5
0.5
Apple is planning to launch a new easy-to-use kitchen appliance with a touchscreen interface, the iToaster. Apple expects to sell 1 million and 2 million units in the first two years after launch, respectively, and then to discontinue this product. Each unit will sell for $200 in the first year after launch, and $150 in the second year. The costs of components and labor are $60 per unit, while salaries and other expenses add up to $10 million in each year the product is sold.
The factory that manufactures the iToaster requires an investment of $60 million right now and $30 million one year from now. It will take one year to complete, so production will only start in the second year. The factory will be depreciated linearly to zero over 5 years after its completion.
To get production up and running, Apple has to buy components worth $5 million immediately before the launch of the product, and add another $2 million worth of components to its inventory exactly one year later.
The firm's…
The president's executive jet is not fully utilized. You judge that its use by other officers would increase direct operating costs by only
$37,000 a year and would save $100,000 a year in airline bills. On the other hand, you believe that with the increased use the
company will need to replace the jet at the end of three years rather than four. A new jet costs $1.27 million and (at its current low rate
of use) has a life of Five years. Assume that the company does not pay taxes. All cash flows are forecasted in real terms. The real
opportunity cost of capital is 10%.
a. Calculate the equivalent annual cost of a new jet.
Note: Do not round intermediate calculations. Enter your answer in dollars not in millions. Round your answer to 2 decimal
places. Enter your answer as a positive value.
b. Calculate the present value of the additional cost of replacing the jet one year earlier than under its current usage.
Note: Do not round intermediate calculations. Enter your answer in dollars not…
Chapter 12 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - Prob. 3PCh. 12 - Prob. 4PCh. 12 - Prob. 5PCh. 12 - Prob. 7PCh. 12 - Prob. 8PCh. 12 - Prob. 9PCh. 12 - Prob. 10PCh. 12 - Prob. 11P
Ch. 12 - Prob. 12PCh. 12 - Prob. 13PCh. 12 - Prob. 14PCh. 12 - Prob. 15PCh. 12 - Prob. 16PCh. 12 - Prob. 17PCh. 12 - Prob. 18PCh. 12 - Prob. 19PCh. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - Prob. 23PCh. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26PCh. 12 - Prob. 27PCh. 12 - Prob. 28P
Knowledge Booster
Similar questions
- The management of First American Bank was concerned about the potential loss that might occur in the event of a physical catastrophe such as a power failure or a fire. The bank estimated that the loss from one of these incidents could be as much as $100 million, including losses due to interrupted service and customer relations. One project the bank is considering is the installation of an emergency power generator at its operations headquarters. The cost of the emergency generator is $800,000, and if it is installed, no losses from this type of incident will be incurred. However, if the generator is not installed, there is a 10% chance that a power outage will occur during the next year. If there is an outage, there is a .05 probability that the resulting losses will be very large, or approximately $80 million in lost earnings. Alternatively, it is estimated that there is a .95 probability of only slight losses of around $1 million. Using decision tree analysis, determine whether the…arrow_forwardQuick Computing currently sells 10 million computer chips each year at a price of $20 per chip. It is about to introduce a new chip, and it forecasts annual sales of 12 million of these improved chips at a price of $25 each. However, demand for the old chip will decrease, and sales of the old chip are expected to fall to 3 million per year. The old chips cost $6 each to manufacture, and the new ones will cost $8 each. What is the proper cash flow to use to evaluate the present value of the introduction of the new chip? Note: Enter your answer in millions.arrow_forwardThe ARA Railroad owns a piece of land along one of its right-of-ways. The land originally cost ARA $100,000. ARA is considering building a new maintenance facility on this land. ARA determined that the proposal to build the new facility is acceptable if the original cost of the land is used in the analysis, but the proposal does not meet the railroad’s project acceptance criteria if the land cost is above $500,000. An investor has recently offered ARA $1 million for the land. Should ARA build the maintenance facility at this location?arrow_forward
- You plan to purchase a car for $28,000. Its market value will decrease by 20% per year. You have determined that the IRS- allowed mileage reimbursement rate for business travel is about right for fuel and maintenance at $0.485 per mile in the first year. You anticipate that it will go up at a rate of 10% each year, with the price of oil rising, influencing gasoline, oils, greases, tires, and so on. You normally drive 15,000 miles per year. What is the optimum replacement interval for the car? Your MARR is 9%.arrow_forwardDuring your first month as an employee at Greenfield Industries (a large drill-bit manufacturer), you are asked to evaluate alternatives for producing a newly designed drill bit on a turning machine. Your boss’ memorandum to you has practically no information about what the alternatives are and what criteria should be used. The same task was posed to a previous employee who could not finish the analysis, but she has given you the following information: An old turning machine valued at $350,000 exists (in the warehouse) that can be modified for the new drill bit. The in-house technicians have given an estimate of $40,000 to modify this machine, and they assure you that they will have the machine ready before the projected start date (although they have never done any modifications of this type). It is hoped that the old turning machine will be able to meet production requirements at full capacity. An outside company, McDonald Inc., made the machine seven years ago and can easily do the…arrow_forwardDuring your first month as an employee at Greenfield Industries (a large drill-bit manufacturer), you are asked to evaluate alternatives for producing a newly designed drill bit on a turning machine. Your boss’ memorandum to you has practically no information about what the alternatives are and what criteria should be used. The same task was posed to a previous employee who could not finish the analysis, but she has given you the following information: An old turning machine valued at $350,000 exists (in the warehouse) that can be modified for the new drill bit. The in-house technicians have givenan estimate of $40,000 to modify this machine, and they assure you that they will have the machine ready before the projected start date (although they have never done any modifications of this type). It is hoped that the old turning machine will be able to meet production requirements at full capacity. An outside company, McDonald Inc., made the machine seven years ago and can easily do the…arrow_forward
- During your first month as an employee at Greenfield Industries (a large drill-bit manufacturer), you are asked to evaluate alternatives for producing a newly designed drill bit on a turning machine. Your boss' memorandum to you has practically no information about what the alternatives are and what criteria should be used. The same task was posed to a previous employee who could not finish the analysis, but she has given you the following information: An old turning machine valued at $350,000 exists (in the warehouse) that can be modified for the new drill bit. The in-house technicians have given an estimate of $40,000 to modify this machi, and they assure you that they will have the machine ready before the projected start date (although they have never done any modifications of this type). It is hoped that the old turning machine will be able to meet production requirements at full capacity. An outside company, McDonald Inc., made the machine seven years ago and can easily do the…arrow_forwardBased on the following information: The investment cost is paid in full in quarter 0, and the cost of the factory is 100000 while the cost of the research is also 100000. The factory has a lifetime of 20 quarters (5 years) and the value of the factory at the end of quarter 20 is 0 Only green jetpacks should be produced at the factory throughout its lifetime. There is no investment in research to streamline production or material consumption. Suppose the quarterly demand in the market is constant and given at P = 338 - 0.018 * Q, where P is price and Q is the number of jetpacks in demand. Assume P is 248 USD and Q is 5000. There are 5 competitors in the market (including you), and all sell the same number of jetpacks each quarter at the price of 248 each. You produce as much as you sell. The costs associated with the quarterly production at the factory are given at K = 178 * Q + 20000, where 178 * Q is direct labor cost and materials, and 20000 is quarterly maintenance cost when Q is…arrow_forwardYou are considering developing an 18-hole championship golf course that requires an investment of $18,000,000. This investment cost includes the course development, club house, and golf carts. Once constructed, you expect the maintenance cost for the golf course to be $640,000 in the first year, $695,000 in the second year and continue to increase by $55,000 in subsequent years. The net revenue generated from selling food and beverage will be about 17% of greens fees paid by the players. The cart fee per player is $20, and 40,000 rounds of golf are expected per year. You will own and operate the course complex for 9 years and expect to sell it for $24,000,000. What is the greens fee per round that will provide a return on investment of 17%? Assume that the greens fee will be increased at an annual rate of 6%. The greens fee that will provide a return on investment of 17% is _____ per round. (Round to the nearest cent.)arrow_forward
- The Calcio Coal Company produces coal at four mines and ships it to four power plants (P1-P4). The cost per ton of producing coal and the production capacity (in tons) for each mine are known. The number of tons of coal demanded by each customer is also known. The cost (in dollars) of shipping a ton of coal from a mine to each plant is available as well. The following table provides the data: Mine P1 P2 P3 P4 Capacity Cost 1 9 15 8 10 125 50 2 7 15 14 12 100 57 3 5 5 11 12 150 55 4 3 6 8 11 120 61 Demand 110 115 135 130 Problem 1: Transporting Coal Using the strategy that minimizes cost, how many tons of coal are shipped from Mine 4 to P1?arrow_forwardMoses Inc. is a small electric company that provides power to customers in a small rural area in the Southwest. The company is currently maximizing its profits by selling electricity to consumers at a price of $0.15 per kilowatt-hour. Its marginal cost is $0.05 per kilowatt-hour, and its average cost is $0.15 per kilowatt-hour. A government regulator is considering a proposal to regulate the firm’s price at $0.05 per kilowatt-hour. Would such a policy improve social welfare? Explainarrow_forwardEmarpy Appliance produces all kinds of major appliances. Richard Feehan, the president of Emarpy, is concerned about the production policy for the company’s best-selling refrigerator. The demand for this has been relatively constant at about 8,000 units each year. The production capacity for this product is 200 units per day. Each time production starts, it costs the company $120 to move materials into place, reset the assembly line, and clean the equipment. The holding cost of a refrigerator is $50 per year. The current production plan calls for 400 refrigerators to be produced in each production run. Assume there are 250 working days per year. (a) What is the daily demand of this product? (b) If the company were to continue to produce 400 units each time production starts, how many days would production continue? (c) Under the current policy, how many production runs per year would be required? What would the annual setup cost be? (d) If the current policy continues, how many…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education