Another department has selected a new piece of equipment to replace an old piece of equipment in your plant. You have been asked to estimate the economic life of the new piece of equipment and the EAC for that economic life. Additionally, you have been asked to estimate what the marginal cost is to keep the existing piece of equipment for an additional year. You have been provided the following details. Your firm’s interest rate is 9%. The purchase price of the new piece of equipment (challenger) is $23,000.
(a) Determine the equivalent annual cost if the new piece of equipment is kept for 1 year, 2 years, 3 years or 4 years
b) What is the economic life of the new piece of equipment?
(c) What is the marginal cost to keep the existing piece of equipment (defender) one additional year if the current salvage value of the existing piece of equipment is $4,000 and will decline to $1,500 at the end of one year and the annual maintenance cost is $4,000
Homework Answers
NOTE:- 9% as opportunity cost because if
we invest the amount in some other source we earn 9pr instead of
new equipment. |
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Another department has selected a new piece of equipment to
replace an old piece of equipment...
A new machine costs $25,000 and has the estimated maximum (physical) life of 5 years. It...
A new machine costs $25,000 and has the estimated maximum
(physical) life of 5 years. It also has the estimated salvage
(market) value (S) and operating and maintenance costs (O&M) in
each of the 5 years of use as shown below: Year n Sn O&Mn EACn
0 $25,000 1 $16,000 $5,000 $16,000 2 $13,000 $8,000 $14,212 3
$11,000 $11,000 $14,159 4 $10,000 $14,000 $14,541 5 $9,500 $17,000
$15,181 MCn $16,000 $12,280 $14,040 $15,880 $18,300 Suppose the
MARR is 8%. The...
Solve without excel: 9.17 A piece of imaging equipment was purchased two years ago for $50,000...
Solve without excel:
9.17 A piece of imaging equipment was purchased two years ago for $50,000 with an expected useful life of 5 years and a $5000 salvage value. Since its in- stallation performance was poor, 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 an- nual operating cost will be $27.000 with a $12,000 salvage after the 3...
One alternative is to replace 18. Typically, there are two alternatives in a replacement analysis. the...
One alternative is to replace 18. Typically, there are two alternatives in a replacement analysis. the defrender now. The other alternative is which of the following? A. Keep the defender for its remaining useful life. B. Keep the defender for another year and then reexamine the situation. Censthe defender until an improved chalenger better than the current challenger comes to market D. Keep the defender as long as it's operational 19. A hospital in The Upper Cumberland area bought a...
A mechanical engineer designs and sells equipment that automates manual labor processes. He is offering a machine/robot...
A mechanical engineer designs and sells equipment that automates manual labor processes. He is offering a machine/robot combination that will significantly reduce labor costs associated with manufacturing garage-door opener transmitters. The equipment has a first cost of $150,000, an estimated annual operating cost of $39,000, a maximum useful life of 5 years, and a $19,000 salvage value anytime it is replaced. The existing equipment was purchased 12 years ago for $65,000 and has an annual operating cost of $78,000. The...
how we got the table Economic Life of a Defender (Existing Asset) It is desired to...
how we got the table
Economic Life of a Defender (Existing Asset) It is desired to determine how much longer a forklift truck should remain in service before it is replaced by the new truck (challenger) for which data were given in Example 9-4 and Table 9-2. The defender in this case is two years old, $7.500. It kept, its originally cost $19.500, and has a present realizable MV of $7,500 MVs and annual expenses are expected to be as...
peryear interest, perform a replacement study or an for the two trade-in offers. 9.17 A piece...
peryear interest, perform a replacement study or an for the two trade-in offers. 9.17 A piece of imaging equipment was purchased two usabl estim seco chase annu com annu pany years ago for $50,000 with an expected useful life of 5 years and a $5000 salvage value. Since its in- stallation performance was poor, it was upgraded for $20,000 one year ago. Increased demand now requires another upgrade for an addition so that it can be used for 3 more...
Indiana Voters Login Library Genesis Mpplication C Q NAVSEA Careers Question 18 Solved: Determine L. U...
Indiana Voters Login Library Genesis Mpplication C Q NAVSEA Careers Question 18 Solved: Determine L. U 20 pts ACMEIs Investigating the need to replace a combined water filtration pump and motor set (defender) with a more efficient running one (challenger). The market price for the existing pump is $20,000.00 It's remaining useful life is 3 years where its salvage value is $5,000.00. The O&M costs are $4,000 per year. The new pump/motor set challenger) costs $30,000.00 with a 3 year...
XYZ Company is considering the purchase of a new piece of equipment and has gathered the...
XYZ Company is considering the purchase of a new piece of equipment and has gathered the following information about the purchase: Initial investment .............. ? Annual cost savings ............. $20,000 Salvage value in 6 years ........ 20% of original cost of the equipment Repair in 4 years ............... $14,000 Cost of capital ................. 10% Life of project ................. 6 years The net present value of this new equipment was -$37,779. Calculate the salvage value for this piece of equipment.
4. A construction company has the option to purchase a new piece of equipment for a...
4. A construction company has the option to purchase a new piece of equipment for a project and is considering 3 alternatives, as listed in the table below. Which option should they buy, assuming a MARR of 13% and linear depreciation of equipment? Model Initial Cost Economic Life AL в | C $60,000 $70,000 $85,000 3 years 4 years 5 years Operating and maintenance costs $10,000 $8,000 $7,500
A small warehousing company is planning to buy a new forklift today to replace an existing...
A small warehousing company is planning to buy a new forklift
today to replace an existing one. The purchase price of the new
forklift is $30,000. Each year the new forklift is operated, you
will incur operating and maintenance (O&M) costs which are
provided in the table below. The new forklift follows a declining
balance depreciation model. The salvage values after the first year
are estimated to be $22,500. The company uses a MARR of 10% for all
financial analysis....
A new machine costs $25,000 and has the estimated maximum
(physical) life of 5 years. It also has the estimated salvage
(market) value (S) and operating and maintenance costs (O&M) in
each of the 5 years of use as shown below: Year n Sn O&Mn EACn
0 $25,000 1 $16,000 $5,000 $16,000 2 $13,000 $8,000 $14,212 3
$11,000 $11,000 $14,159 4 $10,000 $14,000 $14,541 5 $9,500 $17,000
$15,181 MCn $16,000 $12,280 $14,040 $15,880 $18,300 Suppose the
MARR is 8%. The...
Solve without excel:
9.17 A piece of imaging equipment was purchased two years ago for $50,000 with an expected useful life of 5 years and a $5000 salvage value. Since its in- stallation performance was poor, 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 an- nual operating cost will be $27.000 with a $12,000 salvage after the 3...
One alternative is to replace 18. Typically, there are two alternatives in a replacement analysis. the defrender now. The other alternative is which of the following? A. Keep the defender for its remaining useful life. B. Keep the defender for another year and then reexamine the situation. Censthe defender until an improved chalenger better than the current challenger comes to market D. Keep the defender as long as it's operational 19. A hospital in The Upper Cumberland area bought a...
how we got the table
Economic Life of a Defender (Existing Asset) It is desired to determine how much longer a forklift truck should remain in service before it is replaced by the new truck (challenger) for which data were given in Example 9-4 and Table 9-2. The defender in this case is two years old, $7.500. It kept, its originally cost $19.500, and has a present realizable MV of $7,500 MVs and annual expenses are expected to be as...
peryear interest, perform a replacement study or an for the two trade-in offers. 9.17 A piece of imaging equipment was purchased two usabl estim seco chase annu com annu pany years ago for $50,000 with an expected useful life of 5 years and a $5000 salvage value. Since its in- stallation performance was poor, it was upgraded for $20,000 one year ago. Increased demand now requires another upgrade for an addition so that it can be used for 3 more...
Indiana Voters Login Library Genesis Mpplication C Q NAVSEA Careers Question 18 Solved: Determine L. U 20 pts ACMEIs Investigating the need to replace a combined water filtration pump and motor set (defender) with a more efficient running one (challenger). The market price for the existing pump is $20,000.00 It's remaining useful life is 3 years where its salvage value is $5,000.00. The O&M costs are $4,000 per year. The new pump/motor set challenger) costs $30,000.00 with a 3 year...
4. A construction company has the option to purchase a new piece of equipment for a project and is considering 3 alternatives, as listed in the table below. Which option should they buy, assuming a MARR of 13% and linear depreciation of equipment? Model Initial Cost Economic Life AL в | C $60,000 $70,000 $85,000 3 years 4 years 5 years Operating and maintenance costs $10,000 $8,000 $7,500
A small warehousing company is planning to buy a new forklift
today to replace an existing one. The purchase price of the new
forklift is $30,000. Each year the new forklift is operated, you
will incur operating and maintenance (O&M) costs which are
provided in the table below. The new forklift follows a declining
balance depreciation model. The salvage values after the first year
are estimated to be $22,500. The company uses a MARR of 10% for all
financial analysis....
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