1. A company is considering two alternatives with regards to anequipment which it needs. The alternatives are as follows:Alternative A: PurchaseCost of equipmentSalvage valueDaily operating costP700,000100,00050010Economic life, yearsAlternative B: Rental at P1,500 per day.At 18% interest, how many days per year must the equipment bein use if Alternative A is to be chosen.Ans. 152 days

Salvage value is the determines the resale value of an asset at the end of its useful life. It is…

1. A company is considering two alternatives with regards to an equipment which it needs. The alternatives are as follows: Alternative A: Purchase P700,000 100,000 Cost of equipment Salvage value Daily operating cost Economic life, years Alternative B: Rental at P1,500 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen. Ans. 152 days 500 10

1. A company is considering two alternatives with regards to an equipment which it needs. The alternatives are as follows: Alternative A: Purchase P700,000 100,000 Cost of equipment Salvage value Daily operating cost Economic life, years Alternative B: Rental at P1,500 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen. Ans. 152 days 500 10

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Baguio Rabbitry must replace the piping system in its barn. Based on cost of capital of 12% which of the two following alternatives should be chosen using the following methods? a) RORAI b) AW c) PW Pamper pipes P 75,000 Fluid Flush P 90,000 First Cost Operating costs per 5,000 4,000 year Savings per year Salvage value 1,000 2,000 2,000 Useful life 10 10
3 Your company plans to raise price on product A by 5% per year. Due to competition, sales volume from product A is expected to decline at 10% per year. Revenue will be $5M for this year. Alternatively, based on the projection from the marketing department, you may reduce the sales volume decline from 10% to 5% if the price is kept unchanged. The product will be discontinued at the end of year 5 for both scenarios. If the firm's TVOM is 10%, Determine the revenue cash flow streams for both alternatives. What is the Excel financial function to compute PW of the revenue streams
11) Machines that have the following costs are under consideration for a robotized welding process. I the MARR be 13% per year, determine which alternative should be selected on the basis of a PW analysis. Мachine a Machine b First Cost $ 250,000 Annual Operation Cost $ 60,000 Main maintenance Cost $ 15,000 per year Salvage Value 70,000 430,000 40,000 35,000 each 2 years 95,000 Life, Year 3 6. a) Draw the cash flow for these projects b) If the time frame of study be 5 years and the Book value of each machine calculate by 10% depreciation per year. What is your decision?
2-8 Consider the accompanying breakeven graph for an investment, and answer the following questions as they pertain to the graph. Euros (x104) €40r 585850 35 30 25 20 15 10 s 0 Total Revenue Total Cost 250 500 750 1000 1250 1500 1750 Output (units/year) Give the equation to describe total revenue for x units per year. (b) Give the equation to describe total costs for x units per year. (c) What is the "breakeven" level of x in terms of costs and revenues? (d) If you sell 1500 units this year, will you have a profit or loss? How much?
Given the two machines data Machine A Machine B First Cost P8,000.00 P14,000.00 Salvage value 2,000.00 Annual operation 3.000.00 2,400.00 Annual maintenance 1.200.00 1,000.00 Taxes and insurance 3% 3% Life, years Money is worth at least 16%. What is the exact rate of return? 10 15
A Startup is considering buying a $300,000 prece of equipment. If it puranases the equipment, to will take a loan for the entire amout; the interest on the loan is 3%. and the luan will be repond in 5 equal end of year payments. The Startup estimaks that the equipment would generall an additional $160,000 of revenue each year. At the end of 5 year, the equipment would have a salvague. value of $20,000. The tax rate is 25% Assuming a planning horizon of 5 years. that the equipment as depreciated using MACKS (3-year property class) and that the medical practice uses MARK of 7%. an after tax (a) Compute the Present Worth and determine whether the startup Should invest in the equipment (b) Re - compute the present worth if there exists a cl. inflation / year. would descision your change?
1. The following alternatives will be compared based on an 8% interest rate. A 5,000 500 600 5 Machine First cost Annual Maintenance Salvage Value Useful Life B 10,000 200 1,000 12 What is the Equivalent Uniform Annual Cost (EUAC) of machine A? A. 1550 B. 1650 C. 1274 D. 1817
1. TT Racing and Performance Motor Corporation wishes to evaluate two alternative CNC machines for NHRA engine building. Use the AW method at 10% per year to select the better alternative. A. Either (A) or (B) OB. machine s OC. Neither (A) nor (B) D. machine R first cost, S annual operating cost, 5 salvage value, $ life, years machine R -25000 -4000 2000 3 machine s -37050 -5000 3000 5
A start up business is considering two types of equipment - data are as follows: TYPE A ΤΥΡE Β First Cost P200,000.00 P300,000.00 Annual operating cost 32,000.00 24,000.00 Annual labor cost 50,000.00 32,000.00 Insurance and property taxes 3% 3% Payroll taxes 4% 4% Estimated life 10 10 The minimum required rate of return is 15%. Using present worth cost method, determine the value of alternative A and alternative B: ANSWER for ALTERNATIVE A: Blank 1 ANSWER for ALTERNATIVE B: Blank 2 Blank 1 Add your answer Blank 2 Add your answer
A firm is considering which of twodevices to install to reduce costs. Both devices have useful lives of 5 years and no salvage value. Device A costs $10,000 and can be expected to result in $3000 savings annually. Device B costs $13,500 and will provide cost savings of $3000 the first year but will increase $500 annually, making the second-year savings $3500, the third-year savings $4000, and so forth. For a 7% MARR, which device should the firm purchase?
The following costs are associated with three machines being considered for use in a plant. If the interest rate is 12 %, which is the best alternative should be selected? A В C Initial cost 52,000$ 63,000$ 67,000$ Uniform annual BENIFIT 38,000 31,000 37,000 Annual maintenance COST 15,000 9,000 12,000 Salvage value 13000 19,000 22,000 Useful life in years 4 12 Assuming i= 10%, determine which alternative should be selected
Quest io n 12 A manufacturer can sell a certain product for R80 per unit. Total cost consists of a fixed overhead of R4, 500 plus production costs of R50 per unit. (a) How many units must the manufacturer sell to bre ak even? (b) What is the manufact urer's profit or loss if 200 units are sold? (c) How many units must the manufacturer sell to realize a profit of R900? Hint Express the cost function C (r), the revenue function R(r) and the profit function P(r) as line ar functions, where r is the number of units.