ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
Chapter 13, Problem 42P
To determine
Whether the existing asset should be replaced or not.
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Economics
Last year, a decision was made to keep the same equipment in lieu of
buying new equipment. The old equipment's trade-in value last year
was $4000 and its value this year is $2000. The operating cost was
$700 last year. If bought last year, the new equipment would have
cost $13K, the salvage value after 8 years would be $2000, and it
would have an annual operating cost of $4000.
If bought last year, what would have been the EUAC of the new
equipment (in dollars) at 16% interest rate per year? (provide your
answer in the box as a negative value if you arrive at costs)
What would have been the correct decision? (provide your answer
and justification in your pdf file submission)
A manufacturer is considering replacing a production machine tool. The new machine, costing $3700, would have a life of 4 years and no salvage value, but would save the firm $500 per year in direct labor costs and $200 per year indirect labor costs. The existing machine tool was purchased 4 years ago at a cost of $4000. It will last 4 more years and will have no salvage value at the end of that time. It could be sold now for $1000 cash.Assume that money is worth 8% and that the difference in taxes, insurance, and so forth, for the two alternatives is negligible. Use an annual cash flow analysis to determine whether the new machine should be purchased.
A factory with capacity of 700,000 units per year operates at 62% capacity. The annual income is $430,000.00. Annual fixed costs are $190,000.00 and the variable costs are $0.348 per unit.
a) What is the current loss or profit?
b) What is the breakeven point?.
Chapter 13 Solutions
ENGR.ECONOMIC ANALYSIS
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