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 9P
To determine
Replacement of the defender.
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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
BV at
End of
Expenses
during the
Year
Year
Year
Year
$3,000
2,500
$4,500
3,000
1,500
$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 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
A replacement study is to be performed on certain pressing equipment in an industrial laundry. The challenging asset has a computed AW of –$41,000 at i = 15% per year for its anticipated 10-year life. The defender can be sold now for $32,000 or kept for a maximum of 4 more years. If kept, the data below will apply to the defender.
Additional years retained
Operating Cost, $
EOY Salvage value, $
1
34,000
28,000
2
36,000
22,000
3
38,000
15,000
4
40,000
5,000
a. In what year should the company replace the existing equipment with the challenger, assuming existing equipment can be replaced indefinitely with similar used equipment having the same AW as that currently used. (now, 4 years from now, 3 years from now, 2 years from now)
b. What is the minimum economic life of the defender? (1 year, 4 years, 3 years, 2 years)
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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Similar questions
- An engineer calculated the AW values shown for retaining a presently owned machine additional years. A challenger has an ESL of 4 years with AW = $-60,000 per year. Assuming all future costs remain the same, when should the company replace the defender? The MARR is 12% per year. Assume used machines like the one presently owned will always be available. AW of Defender, 2$ |-77,000 |-63,000 |-58,000 -64,000 -70,000 Years Retained 1 2 3 4 O a) at year 5 O b) at year 4 c) at year 1 d) at year 3arrow_forwardA commercial 3D printer is purchased for $340,000. The salvage value of the printer decreases by 50% each year that it is held. The cost to operate and maintain the machine the first year it is used is $13,000; these costs increase by $6,000 each year. What is the optimal replacement interval and minimum EUAC for the printer, assuming a MARR of 15% is used? Click here to access the TVM Factor Table Calculator. ORI: EUAC*: $ yearsarrow_forwardA commercial 3D printer is purchased for $ 380,000. The salvage value of the printer decreases by 35% each year that it is held. The cost to operate and maintain the machine the first year it is used is $ 12,500; these costs increase by $ 4,000 each year. What is the optimal replacement interval and minimum EUAC for the printer, assuming a MARR of 10% is used?arrow_forward
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- An existing robot can be kept if $2,000 is spent now to upgrade it for future service requirements. Alternatively, the company can purchase a new robot to replace the old robot. The following estimates have been developed for both the defender and the challenger. Defender Challenger Current MV…arrow_forwardFrom the data shown, determine the ESL of the challenger. Years Retained 1 2 3 4 5 AW of the Defender, $ -145,000 -106,000 -95,000 -93,000 -96,000 a) n = 2 years b) n = 1 year c) n = 3 years d) n = 4 years e) n = 5 years AW of the Challenger, $ -136,000 -126,000 -99,000 -95,000 -98,000arrow_forwardAn engineer calculated the AW values shown for retaining a presently owned machine additional years. A challenger has an ESL of 4 years with AW = $-60,000 per year. Assuming all future costs remain the same, when should the company replace the defender? The MARR is 12% per year. Assume used machines like the one presently owned will always be available. AW of Defender, 24 -77,000 -63,000 Years Retained 1 12 -58,000 -64,000 -70,000 13 4 a) at year 5 b) at vear 2 always be available. AW of Defender, 2$ |-77,000 -63,000 -58,000 -64,000 -70,000 Years Retained 3 4 15 O a) at year 5 b) at year 2 c) at year 1 d) at year 4 e) at year 3arrow_forward
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