Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Chapter 9, Problem 11P
To determine
Replacement of the defender.
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A specialty concrete mixer used in construction was purchased for $300,000 7 years ago. Its annual O&M costs are $105,000. At the end of the 8-year planning horizon, the mixer will have a salvage value of $5,000. If the mixer is replaced, a new mixer will require an initial investment of $375,000. At the end of the 8-year planning horizon, it will have a salvage value of $45,000. Its annual O&M cost will be only $40,000 due to newer technology. Analyze this using an EUAC measure and a MARR of 15 percent to see if the concrete mixer should be replaced if the old mixer is sold for its market value of $65,000.
a. Use the cash flow approach (insider’s viewpoint approach)
b. use the opportunity cost approach (outsiders viewpoint approach)
Include formulas in excel screen shots.
A replacement analysis is most objectively conducted from the viewpoint of:a. an outsider.b. a consultant.c. a non-owner.d. any of the above.
VML Industries has need of specialized yarn manufacturing equipment for operations over the next 3 years. The firm could buy the machinery for $95,000 and depreciate it using MACRS (this is a 7-year property). Annual maintenance would be $7500, and it would have a salvage value of $25,000 after 3 years. Another alternative would be to lease the same machine for $45,000 per year on an "all costs" inclusive lease (maintenance costs included in lease payment). These lease payments are due at the beginning of each year. VML Industries uses an after-tax MARR of 18% and a combined tax rate of 48%. Do an after-tax present worth analysis to determine which option is preferred.
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
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