The beautiful expert Hand written solution is not allowed. A machine purchased 3 years ago for $140,000 is currently too slow to satisfyincreased demand. The machine can be upgraded now for $90,000 or sold toa smaller company for $40,000. The current machine will have an annualoperating cost of $85,000 per year and a $30,000 salvage value in 3 years. Ifupgraded, the presently owned machine will definitely be retained for 3 moreyears. The replacement, which will serve the company now and for at least 8years, will cost $216,500. Its salvage value will be $50,000 for years 1 through5, $20,000 after 6 years, and $10,000 thereafter. It will have an estimatedoperating cost of $65,000 per year. The company asks you to perform aneconomic analysis at 15% per year using a 3-year planning horizon. Should thecompany replace the presently owned machine now, or do it 3 years fromnow? What are the AW values?The AW value of the defender is $-challenger is $-6170723820 and the AW value of theThe company should replace the defender 3 years from now

Approach to solving the question: Step 1: Identify the relevant cash flows for the defender (current…

Answered: A machine purchased 3 years ago for…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The following tables show the marginal costs of a defender over its remaining four years of service life. If the challenger's minimum EUAC is $29,403, what is the most appropriate replacement decision? Year 1234 Marginal cost $31,053 $26,353 $28,003 $32,803 ○ A. No decision can be made unless additional calculations are made on the challenger B. Replace the defender now OC. No decision can be made unless additional calculations are made on the defender ○ D. Keep the defender for at least one more year
Salim 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%.
With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal to that of machine Y at an interest rate of 9% per year. Determine the replacement value. Market Value, $ Annual Cost, $ per Year Salvage Value Life, Years The replacement value is $ Machine X ? -64,000 10,500 3 Machine Y 91,000 -40,000 for year 1,increasing by 2000 per year thereafter. 15,000 5
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 certain operation is now performed by hand, the labor cost per unit is P 54 and annual fixed charge for tool use is P 10,000. A machine that is considered for this job will coast P 240,000, and have a salvage value of P 10,000 at the end of its 6 - year life. With it labor cost is P 22 per unit and annual fixed charge is P 20,000. At what number of units per year, at zero interest, will the cost of the two methods break even? Select one: a. 1,150 b. 1,105 c. 1,501 d. 1,510
Allen Construction purchased a crane 6 years ago for $130,000. They need a crane of this capacity for the next 5 years. Normal operation costs $35,000 per year. The current crane will have no salvage value at the end of 5 more years. Allen can trade in the current crane for its market value of $40,000 toward the purchase of a new one, which costs $150,000. The new crane will cost only $8,000 per year under normal operating conditions and will have a salvage value of $55,000 after 5 years. If MARR is 20%, determine which option is preferred. a) Use cash flow approach (insider's viewpoint approach) b) Use the opportunity cost approach (outsider's viewpoint approach)
A certain operation is now performed by hand, the labor cost per unit is P 64 and annual fixed charge for tool use is P 10,000. A machine that is considered for this job will coast P 240,000, and have a salvage value of P 10,000 at the end of its 6 - year life. With it labor cost is P 22 per unit and annual fixed charge is P 20,000. At what number of units per year, at zero interest, will the cost of the two methods break even?
3. Angstrom Technologies intends for the company to use the newest and finest equipment in its labs. Precision measurement equipment was purchased 7 years ago for $160,000. Last year a replacement study was performed with the decision to retain 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 the first year and $25,000 the second year. Alternatively, the company can purchase a new system that will have an equivalent annual worth of $47,063 per year over its ESL. The company uses a MARR of 10% per year. Use annual worth analysis to determine when the company should replace the machine.
A 10-year-old backup power system is being considered for early replacement. Its current market value is $16,000. Estimated future market values (MV) and annual operating costs (AOC) for the next 5 years are given in the following table. What is the economic service life of this defender if the interest rate is Z% per year using AW analysis? Year MV AOC 1 10000 -5000 8000 -6500 6000 -8000 4 2000 -9500 -12500 [Hint: the value of Z = |last digit of your unique id+2nd digit of your unique id], Example: if your id is 201-021-651 then Z = |1+2| = 3.00%, so, interest rate will be 3.00%) 3.
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 and at the end of the 8-year planning horizon, the new mixer will have a salvage value of $45,000. Its annual O&M cost will be only $40,000 due to newer technology. Use an EUAC measure and a MARR of 15% to see if the concrete mixer should be replaced if the old mixer is sold for its market value of $65,000. Solve, a. Use the cash flow approach (insider’s viewpoint approach). b. Use the opportunity cost approach (outsider’s view point approach).
Do the operating costs differ between the defender and challenger? Explain how?
We bought a CNC machine 3 years ago for $100,000 with a salvage value of $20,000 after 8 years. It has an annual operating cost of $30,000. A new machine is available at a price of $120,000, a life of 10 years and a salvage value of $30,000. The annual operating cost for this machine is $15,000. The market value for the CNC machine is $70,000 now. At MARR= 10% per year should we keep the CNC machine or replace it?

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