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- (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 $17,000A 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.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.
- 1) A public agency is obliged to purchase a compressor with an economic life of 10 years or by leasing at the same time. The purchase price of the compressor is 7.500.000 TL, and if it is purchased, it will bear 250.000 TL annual electricity consumption expense, 300.000 TL standard maintenance repair expenses and an additional 600.000 TL maintenance expenses every two years. The scrap value of the compressor is 1.500.000 TL. If the compressor is not purchased and a lease is chosen, 2,500,000 rents per year, including all operating expenses, will be paid for 10 years. Since the annual nominal interest rate is 22%, evaluate the way in which the public agency should obtain the compressor according to the ANNUAL EXPENSE method.3. The Ajax Corporation has an overhead crane thathas an estimated remaining life of 10 years. The cranecan be sold now for $8,000. If the crane is kept in service,it must be overhauled immediately at a cost of $5,000.Operating and maintenance costs will be $3,000 peryear after the crane is overhauled. The overhauled cranewill have zero MV at the end of the 8-year study period.A new crane will cost $20,000, will last for 8 years,and will have a $4,000 MV at that time. Operating andmaintenance costs are $1,000 per year for the new crane.The company uses a before-tax interest rate of 10% peryear in evaluating investment alternatives. Should thecompany replace the old crane?The division director for Sandhill Corporation's Mississippi division, which operates as an investment center, is considering investing in machinery which costs of $2230000 and is expected to generate $353000 in additional operating income. If the division's weighted average cost of capital is 11% and its tax rate is 20%, what is the equipment's EVA? O $37100 $353000 $107700 $245300
- An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated MV of $12,000 at the end of an estimated useful life of 14 years. Compute thedepreciation amount in the third year and the BV at the end of the fifth year of life by each of these methods: Solve, a. The SL method. b. The 200% DB method with switchover to SL. c. The GDS. d. The ADS.Outdoor Sports is considering adding a putt putt golf course to its facility. The course would cost $167,000, would be depreciated on a straight-line basis over its 6-year life, and would have a zero salvage value. The sales would be $84,000 a year, with variable costs of $27,400 and fixed costs of $12,000. In addition, the firm anticipates an additional $15,300 in revenue from its existing facilities if the putt putt course is added. The project will require $2,600 of net working capital, which is recoverable at the end of the project. What is the net present value of this project at a discount rate of 12 percent and a tax rate of 40 percent?uppose 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…
- 4. ABY company purchased a new CNC machine for $100,000. The market value of the new machine in each year is given in the table below. Annual operating and maintenance costs will be $30.000 per year. MARR is 12% per year. a) Calculate the marginal cost of the new CNC machine in years I to 4. b) Determine the economic life of new CNC machine.A tax duty free importation of a 30HP sandmill for paint manufacturing cost P360,000. Bank charges arrastre and brokerage cost P5,000. Foundation and installation costs were P25,000. Other incidental expenses amount to P20,000. Salvage value of the mill is estimated to be P60,000 after 20 years. Find the appraisal value of the mill using SLM at the end of 10 years. 4.8. Saudi Post can sell envelopes for $0.2 per envelope. These envelopes are made using machines that cost $100,000 and have no salvage value at the end of 10 years. The equipment's annual operating costs will be $7,000 per year plus $0.11 per envelope produced. MARR is 12%lyear. Determine the minimum number of envelopes that Saudi Post must produce to breakeven. (select the closest answer) a. 196,649 b. 54,885 c. 274,427 d. 315,964