Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 7P
a.
To determine
The better alternative by comparing before tax equivalent annual cost by using the preceding information.
b.
To determine
The better alternative by comparing before tax equivalent annual cost by using the information on annual cost of operations without a truck.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Mr. Russ T. Steele sells his old vehicle for $5000 (you get more if you private salel) and pays cash for a used (but newer vehicle) that
costs $10,000. He also understands that he needs to allow for maintenance and operation costs of his vehicle. He estimates that these
costs will be approximately $2000 a year and estimates that the costs will increase by $100 per year. He hopes to keep the vehicle for
five years and then sell it for an estimated value of $2000. Mr. Steele has an MARR of 8%. The present value of the cash flow
associated with his purchase is most nearly:
Oa. -$7,400
b.$-12,400
C $12,000
Od.-$15,100
8 units of milling machine that costs $ 267228 each are bought today. They can be used for 10 years and can be sold at $ 33454 each at the end of their useful life. Lubrications and minor repairs are estimated to be $ 21139 per unit, annually. Each machine is expected to operate at an average of 2978 hours per year at an average power consumption of 1.9 kW per unit. The effective annual interest rate is 2.5%. Assume that the distribution utility charges $ 9/kWhr. Using captalized cost principle, determine the following: a.) captalized cost of the investment, b.) total present worth of all the costs that occur annually (annually recurring cost) in the whole investment, c.) total present worth of all the costs that occur one-time (non-recurring) in the whole investment
Matchim's Paving is investing in a new wider paving machine that will cost $131000, which is expected to return $22500 per year of the next 12 years. At the end of the 12 years the paving machine is expected to have a salvage value of $20000. Assuming the cash flow is at the end of the year, what is the Pay Back Period, in years, for the project?
Chapter 13 Solutions
Engineering Economy (17th Edition)
Knowledge Booster
Similar questions
- You are considering buying a 10-year-old machine for $280, or a new fuel-efficient machine for$600. The new machine will save you $5 per month on your fuel bill, and you will be able to sellit for $300 in 10 years. The used machine will have no resale value at that time. Assume theinterest rate is 3% per year. According to the information given, which machine will you buy?arrow_forwardSalim Service company owns several taxis that were purchased four years ago for $27000 each. The current market value is $10000 each. If they are kept for another 6 years, they can be sold for $2000 each. The annual maintenance cost per cab is $900 a year. Salim Service is looking at replacing the cabs with the option to lease new cabs at an annual cost of $9000 per year per cab which includes free maintenance. How much more would it cost them per year to switch to leasing? Assume an interest rate of 9%.arrow_forwardThe AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $−95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $-90,000 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, Years AW Value, $ per Year 1 -89,000 2 -95,000 3 -86,000 4 -85,000 5 -95,000 a) The ESL of the defender is ____year(s) with the lowest AW of $_____. b) The (Click to select defender challenger) has the lower AW at $______for n equal to ____ .arrow_forward
- The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $−95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $-83,000 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, Years AW Value, $ per Year 1 -92,000 2 -94,000 3 -80,000 4 -99,000 5 -95,000 a) The ESL of the defender is year(s) with the lowest AW of $ . b) The (Click to select) challenger defender has the lower AW at $ for n equal to .arrow_forwardnot use excel. Typed answer onlys Q)Calculate the capitalized cost of a machine-2 that has a first cost of $91065 and annual cost of $7938 per year Given that i=10% per year and the number of years is infinite.arrow_forwardA new machine can be purchased today for $450,000. The annual revenue from the machine is calculated to be $72,000, and the equipment will last 10 years. Expect the maintenance and operating costs to be $4500 a year and to increase $750 per year. The salvage value of the machine will be $35,000. What is the rate of return for this machine?arrow_forward
- The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, that is, if it is kept 5 more years, the annual worth is $95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $ −89,500 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, Years AW Value, $ per Year 1 −92,000 2 −88,000 3 −85,000 4 −89,000 5 −95,000arrow_forwardA large city in mid-west needs to buy a street-cleaning machine. A used vehicle will cost $75000 and has a market value of $20000 after its five-year life. A new system cost $150000 and has a market value of $40000 after five-years. The new system has some features that reduce labor hours compared with used system. the used system requires labor hours of 8 hours per day and 20 days per month. the labor costs are $50 per hour. the MARR is 12%. if the new system is expected to be able to reduce labor hours by 20% compared with the used system, which system should the city purchase? and how many hours must the system be operated at the break even?arrow_forwardThe AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $-95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $-87,000 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, Years AW Value, $ per Year 1 -80,000 -93,000 3. -82,000 4 -92,000 -95,000 a) The ESL of the defender is year(s) with the lowest AW of S b) The defender has the lower AW at S for n equal toarrow_forward
- Mary, a project manager for ABC Ic., is reviewing a product quality improvement project. She has determined that the project's Annual Worth of $3,396. for a period of 8 years. She now has to calculate the IRR for the project but unfortunately she has lost some information about the cash flows. She knows only that the project has: a 8-year project life with an initial cost of $400,000. a set of equal revenue cash flows occurred at the end of each year for 8 years, and • MARR used for calculation the Annual Worth was 8%. Find the annual revenue first and then calculate the IRR for the project = ? O 14% < IRR (i*) < 15% O 13% < IRR (i*) < 14% O 10% < IRR (i*) < 11% O 9% < IRR (i*) < 10% O 8% < IRR (i*) < 9%arrow_forwardA company has invested in machinery that $23,000 to purchase and install and the company purchased a 3 year warranty for $5,000. The warranty covers all maintenance and repairs for three years with no cost to the company. At year 4, the maintenance costs are estimated at $2,000 and will increase by $1,200 per year after that. Operating costs are expected to be $800 every year. The machinery will last nine years. If the interest rate is 6%, what is the machinery's economic life that minimizes the EUAC?arrow_forwardThe plant manager at a company would like to perform an analysis for a new $250,000 machine. She estimates benefits of $20,000 in the first year, and benefits are increasing by 10% per year. 1) What is the payback period for the machine? 2)Suppose that the machine life is 15 years and machine has a salvage value of 20% of the initial cost at the end of its useful life. If the MARR of the company is 11 % per year, is this investment acceptable? Why?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:PEARSONEngineering 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 LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial 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