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 9, Problem 10P
To determine
Replacement of the defender.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
one factory manager bought a rare machine for $10 million. It is estimated that the sales value of the machine at the end of the first year will be $3 million and the machine will be worth $500,000 due to the demand by the antique dealers. The maintenance cost is expected to be $300,000 in the first 3 years and double each year thereafter. In this way, the maintenance cost of the 4th year is $600,000, the maintenance cost of the 5th year is $1,200,000, etc. Calculate the economic life of this machine based on a 15% MCVO.
A) 7
B) 3
C)12
D) 6
E) 9
For P500, 000, an engineer purchased a piece of equipment. He added another P40,000 to his budget for installation and other costs. The equipment's expected useful life is ten years. The salvage value is x% of the original cost. The book value at the end of five years using the straight line technique will be P300,500. What is the numerical value of x?
Digital Tech Dynamics purchased a new quality inspection system for $550,000. The estimated salvage value was $50,000 after 10
years. Currently, the expected remaining life is 7 years with an AOC of $67,500 per year and an estimated salvage value of $40,000.
The new president has recommended early replacement of the system with one that costs $430,000 and has a 12-year economic
service life, a $35,000 salvage value, and an estimated AOC of $50,000 per year. If the MARR for the corporation is 12% per year, use
factor-based relations to determine the minimum trade-in value necessary now to make the president's replacement economically
advantageous.
The minimum trade-in value necessary now to make the president's replacement economically advantageous is $[
Chapter 9 Solutions
Engineering Economy (17th Edition)
Ch. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - A city water and waste-water department has a...Ch. 9 - Prob. 9PCh. 9 - Prob. 10P
Ch. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - Use the PW method to select the better of the...Ch. 9 - Prob. 14PCh. 9 - Prob. 15PCh. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 21PCh. 9 - Prob. 22PCh. 9 - Prob. 23PCh. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Prob. 26PCh. 9 - Prob. 27SECh. 9 - Prob. 28SECh. 9 - Prob. 29CSCh. 9 - Prob. 30CSCh. 9 - Prob. 31CSCh. 9 - Prob. 32FECh. 9 - Prob. 33FECh. 9 - Prob. 34FECh. 9 - Prob. 35FECh. 9 - Prob. 36FE
Knowledge Booster
Similar questions
- State-of-the-art digital imaging equipment purchased 2 years ago for $50,000 had an expected useful life of 5 years and a $5000 salvage value. After its installation the performance was poor, and it was upgraded for $20,000 one year ago. Increased demand now requires another upgrade for an additional $22,000 so that it can be used for 3 more years. Its new annual operating cost will be $27,000 with a $12,000 salvage after the 3 years. Alternatively, it can be replaced with new equipment costing $65,000, an estimated AOC of $14,000, and an expected salvage of $23,000 after 3 years. If replaced now, the existing equipment can be traded for only $7000. Use a MARR of 10% per year. (a) Determine whether the company should retain or replace the defender now. (b) Based on the poor experience with the current equipment, assume the person doing this analysis decides the challenger may be kept for only 2 years, not 3, with the same AOC and salvage estimates for the 2 years. What is the decision?arrow_forwardAssume the MARR is 10% per year for this analysis. A presently owned machine that was purchased 8 years ago for $450,000 is under consideration for replacement. It has an annual operating cost of $120,000 per year and a salvage value of $40,000 whenever it is replaced. The challenger has a first cost of $670,000, an expected annual operating cost of $94,000, and a salvage value of $60,000 after its 10-year economic life. The breakeven market value of the presently owned machine required to make the AW values of the two machines the same, if the presently owned machine is kept for 5 more years and then replaced with the challenger that has the same AW, is closest to: (a) $196,340 (b) $255,390 (c) $325,360 (d ) $394,770arrow_forwardTo improve package tracking at a UPS transfer facility, conveyor equipment was upgraded with RFID sensors at a cost of $345,000. The operating cost is expected to be $148,000 per year for the first 3 years and $210,000 for the next 3 years. The salvage value of the equipment is expected to be $140,000 for the first 3 years, but due to obsolescence, it won’t have a significant value after that. The interest rate is 10% per year. Determine the ESL and equivalent AW using tabulated factors.arrow_forward
- Three years ago, Witt Gas Controls purchased equipment for $80,000 that was expected to have a useful life of 5 years with a $9000 salvage value. Increased demand necessitated an upgrade costing $30,000 one year ago. Technology changes now require that the equipment be upgraded again for another $25,000 so that it can be used for 3 more years. Its annual operating cost will be $47,000, and it will have a $22,000 salvage after 3 years. Alternatively, it can be replaced with new equipment that will cost $68,000 with operating costs of $35,000 per year and a salvage value of $21,000 after 3 years. If replaced now, the existing equipment will be sold for $9000. Calculate the annual worth of the defender at an interest rate of 10% per year. Answer: $ 54,025 Subject: ENGINEERING ECONOMICS Lesson: Decisions Under Certaintyarrow_forwardCompany X is looking to expand their operations to add a second product line capable of producing 1.25 Million units per year. The total estimated investment cost for the new line is $25 Million, with a salvage value equal to 20% of the purchase price at the end of the 6-year project life. The annual expected sales volume is shown below, in thousands of units: Year 1 2 3 4 5 6Volume 525,000 600,000 725,000 800,000 925,000 1,000,000 The average selling price is fixed for the project life at $125 per unit. Variable costs (per unit) include $35 for materials, $20 for manufacturing, and $18 for labor. There are additional fixed operating and maintenance costs totaling $14.25 Million per year. The company’s working capital calculations are based on a 2.5-month supply of raw materials and 1.5 months of combined inventory (WIP and finished goods) that it maintains to balance overall industry demand. FX…arrow_forwardA critical machine in BHP Billiton's copper refining operation was purchased 7 years ago for $160,000. Last year a replacement study was performed with the decision to retain it for 3 more years. The situation has changed. The equipment is estimated to have a value of $8000 if "scavenged" for parts now or anytime in the future. If kept in service, it can be minimally upgraded at a cost of $43,000 to make it usable for up to 2 more years. Its operating cost is estimated at $22,000 in the first year and $29,000 in the second year. Alternatively, the company can purchase a new system, the challenger, that will have an AWC of $-44,000 over its ESL. Use a MARR of 10% per year and annual worth analysis to determine when the company should replace the machine. The AW value of the challenger is $- [ and the AW value of the defender at the end of year 2 is $-[ The company should replace the machine (Click to select)arrow_forward
- A critical machine in BHP Billiton's copper refining operation was purchased 7 years ago for $160,000. Last year a replacement study was performed with the decision to retain it for 3 more years. The situation has changed. The equipment is estimated to have a value of $8000 if "scavenged" for parts now or anytime in the future. If kept in service, it can be minimally upgraded at a cost of $43,000 to make it usable for up to 2 more years. Its operating cost is estimated at $22,000 in the first year and $29,000 in the second year. Alternatively, the company can purchase a new system, the challenger, that will have an AWC of $-51,000 over its ESL. Use a MARR of 10% per year and annual worth analysis to determine when the company should replace the machine. The AW value of the challenger is $- 47254.1275 and the AW value of the defender at the end of year 2 is $- 59000 The company should replace the machine after two yearsarrow_forwardA milling machine with enhanced CNC controls that allow for high-speed machining of free-form parts was purchased 2 years ago for $195,000. The company wants to purchase a recently available faster model with control up to 8 axes for $240,000. The presently owned machine can be sold today for $105,000. Its operating cost over the past 2 years has been $30,000 per year. The value that should be used as P for the presently owned machine is: (a) $240,000 (b) $195,000 (c) $105,000 (d ) $30,000arrow_forwardThe mining company is considering purchasing a machine which costs $30000 and is expected to last 12 years with a $3000 Salvage value. The annual operating expenses are expected to be $9000 for the first 4 years, but owing to decreased use, the operating costs will decrease by $400 per year for the next 8 years. Alternatively, the company can prirchase a highly automated machine at a cost of $58000. This machine will last only 6 years because of its high technology. and delicate design, and its salvage value will be $15000. Because it it is so automated, its operating cost will be only $4.000 per year. If the company's minimum attractive fate of return is 20% per year, which Machine should be selected on the basis of present worth analysis?arrow_forward
- A building supplies distributor purchased a gasoline-powered forklift truck 4 years ago for $8,000. At that time, the estimated useful life was 8 years with a salvage value of $800 at the end of this time. The truck can now be sold for $2,500. For this truck, average annual O&M expenses for year j have been Cj = $2, 000 + $400(j − 1) Now the distributor is considering the purchase of a smaller battery-powered truck for $6,500. The estimated life is 10 years, with the salvage value decreasing by $600 each year. Average annual O&M expenses are expected to be $1,200. If a MARR of 10% is assumed and a 4-year planning horizon is adopted, based on an annual worth cash flow approach should the replacement be made now?arrow_forwardHydrochloric acid, which fumes at room temperatures, creates a very corrosive work environment. A mixing machine working in this environment is deteriorating fast and can be used for only 1 more year, at which time it will be scrapped. It was purchased 3 years ago for $88, 000 and its operating cost for the next year is expected to be $67,000. A more corrosion-resistant challenger will cost $226,000 with an operating cost of $54,000 per year. It is expected to have a $ 60,000 salvage value after its 10-year ESL. At an interest rate of 15% per year, what minimum trade - in value will make the challenger economically attractive? On equating the AW values of the defender and the challenger, to calculate the minimum trade - in value of the challenger, the spreadsheet tool that should be used is GOAL SEEK. The minimum trade - in value that will make the challenger economically attractive will be $54, 703.96. Give correct answer Hydrochloric acid, which fumes at room temperatures, creates a…arrow_forwardEstimate the cost of ownership in terms of present worth for a machine based on the following data: Cost of machine = P120,000 Resale value in 8 years = P30,000 Maintenance, repair etc. = P5,000 per year and increasing P800 each year Rate of interest = 16%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