Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 12, Problem 23P
(a):
To determine
Calculate the expected return.
(b):
To determine
Calculate the probability.
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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
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during the
Year
Year
Year
Year
$3,000
2,500
$4,500
3,000
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$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.
The replacement of a planning 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 11 years and a $2,000 MV at that time. It is estimated that annual
expenses will average $15,500 per year. The defender has a present BV of $6,000 and a present MV of $3500. Data for the defender for the next three years are
given below. Using a before-tax interest rate of 10% per year, make a comparison to determine whether it is economical to make the replacement now.
Year MV at End of BV at End of Expenses during
Year
Year
the Year
$18,000
25,000
S- 1,500
$4,500
2
- 1,750
3,000
3
-2,000
1,500
32,000
Click the icon to view the interest and annuity table for discrete compounding when i 10% per year.
Fil in the table for the EUAC values for the defender for years 1-3. (Round to the nearest dollar.)
Year
EUAC
$25350
$24755
3
$ 25758
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 $25,000
for 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 BV
of $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 is
economical to make the replacement now.
Year MV at End of BV at End of Expenses during
Year
1
$3,000
Year
$4,125
the Year
$20,000
2
2,750
2,750
26,000
3
2,500
1,375
32,000
Click 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.)
Year
EUAC
1
2
3
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
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