A 3-year old truck is being considered for early replacement. Its Current market value is $25,000. Estimated future market values and annual operating costs for the next 5 years are given in the following table. What is the ESL if i=10%? Year MV, $ AOC, $ 1 10,000-5,000 2 3 4 5 8,000 -6,500 6000 -8,000 2000 -9,500 0 -12,500 O 5 years O 4 years O 3 years 2 years
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- A piece of construction equipment cost $11200 fully installed. The annual maintenance costs and market values for each year k are listed in the table below. The firm uses an MARR of 8%. Use this information to answer the questions listed below. ΕΟY(k) 1 2 3 4 AE 950 1900 2850 3800 MV(k) 6700 4700 3200 2200 1700 Please calculate your answer to the nearest whole dollar. Format 0000 No commas If the textbook does not have a discount factor table for the MARR, use Excel to calculate the result. Discount factors are 4 decimal places. Format 0.0000 a) What is the useful life, N, of the equipment? years b) What is the best economic life of the equipment? years c) What is the EUAC that corresponds to your answer in part b? $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 13% per year. Determine the replacement value. Market Value, $ Annual Cost, $ per Year Salvage Value Life, Years Machine X ? -56,500 13,500 3 Machine Y 84,000 -40,000 for year 1,increasing by 2000 per year thereafter. 18,000 5uppose that you purchased a HVAC system five years ago for $75, 000. The O&Mcosts are $15, 000 this year and are expected to increase by $1, 000 each year for the next five yearsthen remain the same for the following years.The current salvage value of the system is $15, 000; salvage value after one year is estimated tobe $12, 000; after two years, $11, 000; after three years, $10, 000; after four years, $9, 000; and so on.A new industrial HVAC system is available for purchase at a price of $95, 000, including instal-lation. The market value of the new system will decrease at a rate of 15% each year. The O&Mcosts are expected to be $1, 000 in the first year, and will increase at a rate of 20% each year. Themaximum service life of the new system is 10 years. Assume that your company uses an interestrate of 10% for all project evaluations.(a) Find the remaining economic life of the currently owned asset.(b) What is the economic service life of the new system?(c) Use the…
- A $20,000 machine will be purchased by a company with an MARR of 10%. It will cost $5,000 to install and removal costs are insignificant. What is its economic life and minimum EUAC cost given the following O&M costs: Their is on salvage value including in the problem YR, n 1 2 3 4 O&M $5,000 $8,000 $11,000 $14,000 $17,000 5Exercise 4 A bottling machine was installed three years ago at a cost of $ 100,000. Today, the machine's market value is $ 30,000. The machine is expected to be operational for a maximum of four additional years. The yearly market values and operating costs of the existing machine are listed in the table below. The numbers are expressed in today's dollars. The investor uses an MARR of 7%/year. Years 3 5000 35,000 1 2 12,000 10,000 20,000 25,000 Market Value Annual Costs 35000 1- Calculate the economic service life and the associated AW" of the existing machine. 2- After investigating the market, you discover that the best available replacement option has an economic service life of 4 years and an associated AW" of costs of 35,000 USD. When should you replace the existing machine and why?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
- 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.11:36 00 VOLTE 76% expert.chegg.com/qna/auth Chegg Hide student question Time Left: 01:51:59 A 8 ✓ Student question A machine has a first cost of $24,000. Its market value declines by 20% annually. The repair costs are covered by the warranty in Year 1, and then they increase $900 per year. The firm's MARR is 12%. Find the minimum EUAC for this machine and its economic life. Skip G Exit Σ Q 2 Submit ... TrainingNew-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $830,000, and it would cost another $22,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $485,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $17,500. The sprayer would not change revenues, but it is expected to save the firm $351,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. What is the Year-0 net cash flow? $ What are the net operating cash flows in Years 1, 2, and 3? Year 1: $ Year 2: $ Year 3: $ What…
- 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 13% per year. Determine the replacement value. Market Value, $ Annual Cost, $ per Year Salvage Value Life, Years The replacement value is $ Machine X ? -58,000 14,500 3 Machine Y 84,000 -40,000 for year 1,increasing by 2000 per year thereafter. 20,000 5(Chapter 13) A $20,000 machine will be purchased by a company with an MARR of 10%. It will cost $5,000 to install and removal costs are insignificant. What is its economic life and minimum EUAC cost given the following O&M costs: YR, n 1 2 3 4 5 O&M $5,000 $8,000 $11,000 $14,000 $17,0003. The annual worth method An office supply company has purchased a light duty delivery truck for $15,000. It is anticipated that the purchase of the truck will increase the company’s revenue by $10,000 annually, whereas the associated operating expenses are expected to be $3,000 per year. The truck’s market value is expected to decrease by $2,500 each year it is in service. If the company plans to keep the truck for only 2 years, what is the annual worth of this investment? The MARR = 18% per year