The replacement of a planning 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 $32,00 for installation and will have an estimated economic life of 11 years and a $1,800 MV at that time. It is estimated that annual expenses will average $16,000 per year. The defender has a present of $6,000 and a present MV of $3500. 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 economical to make the replacement now. Year 1 2 MV at End of BV at End of Expenses during Year Year the Year $-1,500 $4,500 -2,000 3,000 - 2,500 3 1,500 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 1 2 3 EUAC $ $ $ $18,000 22,000 26,000

The replacement of a planning 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 $32,00 for installation and will have an estimated economic life of 11 years and a $1,800 MV at that time. It is estimated that annual expenses will average $16,000 per year. The defender has a present of $6,000 and a present MV of $3500. 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 economical to make the replacement now. Year 1 2 MV at End of BV at End of Expenses during Year Year the Year $-1,500 $4,500 -2,000 3,000 - 2,500 3 1,500 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 1 2 3 EUAC $ $ $ $18,000 22,000 26,000

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

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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
From 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 -98,000
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.
: A machine was purchased and installed 6 years ago for $50000 with a useful life of 10 years. The salvage value is now $5500 and decreasing at a rate of $500 per year. The machine has a maintenance cost of $2000 per year. Assuming a 12.4% MARR, should the company replace the machine this year with a potential new machine that has a EUAC of $3000 per year? (show your work)
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…
A Civil Engineer is considering establishing his own company. An investment of $4,000,000 will berequired, which will be recovered in 15 years.It is estimated that revenue will be $8,000,000 per year and that operating expenses will be as follows:Materials $1,600,000 per yearLabor $2,800,000 per yearOverhead $400,000 + 10% of the yearly revenueOther expenses $600,000 per yearThe engineer will give up his regular job paying $2,160,000 per year and devote his time fulltime to theoperation of the business; this will result in decreasing labor costs by $400,000 per year, material costs by$280,000 per year and overhead cost by $320,000 per year. If the man expects to earn at least 20% ofhis capital, should he invest? NOTE: Use Annual Worth Method.
A Civil Engineer is considering establishing his own company. An investment of $4,000,000 will berequired, which will be recovered in 15 years.It is estimated that revenue will be $8,000,000 per year and that operating expenses will be as follows:Materials $1,600,000 per yearLabor $2,800,000 per yearOverhead $400,000 + 10% of the yearly revenueOther expenses $600,000 per yearThe engineer will give up his regular job paying $2,160,000 per year and devote his time fulltime to theoperation of the business; this will result in decreasing labor costs by $400,000 per year, material costs by$280,000 per year and overhead cost by $320,000 per year. If the man expects to earn at least 20% ofhis capital, should he invest? NOTE: Use Future Worth Method.
Economics A commercial 3D printer is purchased for $310,000. The salvage value of the printer decreases by 45% each year that it is held. The cost to operate and maintain the machine the first year it is used is $12,000; these costs increase by $5,500 each year. What is the optimal replacement interval and minimum EUAC for the printer, assuming a MARR of 11% is used? ORI: years EUAC*: $
An $80,000 baling machine for recycled paper was purchased by the XYZ company two years ago. The current MV of the machine is $50,000, and it can be kept in service for seven more years. MARR is 12% per year and the projected net annual receipts (revenues less expenses) and end-of-year market values for the machine are shown below. When is the best time for the company to abandon this project? END OF YEAR 1 2 3 4 5 6 7 Net annual receipts $20,000 $20,000 $18,000 $15,000 $12,000 $6,000 $3,000 Market value 40,000 32,000 25,000 20,000 15,000 10,000 5,000
A construction firm needs a new small loader. It can be purchased for $20,000. The firm expects the loader to have a salvage value of $5,000 after 7 years. The maintenance cost will be $1,400 each year. The firm's interest rate is 8% per year. Compute the Equivalent Uniform Annual Worth (EUAW). EUAW = EUAB - EUAC Submit the absolute value of your answer (positive value). Margin of error: +/- 50
(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 $17,000
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 = $-60,000 per year. Assuming all future costs remain the same, when should the company replace the defender? The MARR is 12% per year. Assume used machines like the one presently owned will always be available. AW of Defender, 24 -77,000 -63,000 Years Retained 1 12 -58,000 -64,000 -70,000 13 4 a) at year 5 b) at vear 2 always be available. AW of Defender, 2$ |-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 3