An old forklift is due for a replacement analysis. It has a current market value $9,000. The market values and operation and maintenance costs for each of the remaining years of service are giver below. The MARR is 12% per year. (a) Complete the table of marginal costs of the old forklift for each of the remaining years of service. (b) If the challenger has a minimum EUAC of $5,536, answer the two additional questions. Forklift (Defender) Year MV at EOY O&M Costs 1 $7,000 $3,000 2 6,000 3,000 3 5,000 3,500 4 3,000 4,500 Click the icon to view the interest and annuity table for discrete compounding when MARR = 12% per year. Answers (a) Fill in the table below. (Round to the nearest dollar.) Year 1 Marginal Cost 2 3 (b) Since Analysis Technique No 2 is applicable here (make sure you know why, Example 5 Module 10), which additional calculation is required before the replacement decision can be made? OA. The minimum marginal cost of the challenger OB. The minimum EUAC of the defender over its remaining life Then, the decision will be made to replace the defender if

An old forklift is due for a replacement analysis. It has a current market value $9,000. The market values and operation and maintenance costs for each of the remaining years of service are giver below. The MARR is 12% per year. (a) Complete the table of marginal costs of the old forklift for each of the remaining years of service. (b) If the challenger has a minimum EUAC of $5,536, answer the two additional questions. Forklift (Defender) Year MV at EOY O&M Costs 1 $7,000 $3,000 2 6,000 3,000 3 5,000 3,500 4 3,000 4,500 Click the icon to view the interest and annuity table for discrete compounding when MARR = 12% per year. Answers (a) Fill in the table below. (Round to the nearest dollar.) Year 1 Marginal Cost 2 3 (b) Since Analysis Technique No 2 is applicable here (make sure you know why, Example 5 Module 10), which additional calculation is required before the replacement decision can be made? OA. The minimum marginal cost of the challenger OB. The minimum EUAC of the defender over its remaining life Then, the decision will be made to replace the defender if

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...

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Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?
Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
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An injection molding system has a first cost of $200,000 and an annual operating cost of $85,000 in years 1 and 2, increasing by $4,500 per year thereafter. The salvage value of the system is 25% of the first cost regardless of when the system is retired within its maximum useful life of 5 years. Using a MARR of 9% per year, determine the ESL and the respective AW value of the system. The ESL is year(s) and AW value of the system is $
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