An Engineering Firm needs additional equipment for the completion of its project. The first alternative is to purchase a brand new equipment worth P1,500,000 with P400,000 salvage value at the end of its 15-year life. Daily operating cost using this equipment is P500. Second alternative is to rent another equipment for P1,500 per day. What must be the minimum number of days per year the equipment will be used so that purchasing this new equipment is more economical than renting another if interest rate is 18%.

An Engineering Firm needs additional equipment for the completion of its project. The first alternative is to purchase a brand new equipment worth P1,500,000 with P400,000 salvage value at the end of its 15-year life. Daily operating cost using this equipment is P500. Second alternative is to rent another equipment for P1,500 per day. What must be the minimum number of days per year the equipment will be used so that purchasing this new equipment is more economical than renting another if interest rate is 18%.

Fundamentals Of Construction Estimating

4th Edition

ISBN:9781337399395

Author:Pratt, David J.

Publisher:Pratt, David J.

Chapter9: Pricing Construction Equipment

Section: Chapter Questions

Problem 6RQ

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Show the complete solution An existing machine in the factory has an annual maintenance cost of 40,000. A new and more efficient machine will require an investment of 90,000 and it is estimated to have a salvage value of 30,000 at the end of 8 years. Its annual expenses for maintenance is 22,000. If the company's MARR is 12%, will it be worthwhile to purchase the new machine using IRR method?
A company is considering buying a new piece of machinery. The initial cost of the machine is 80,000 and its salvage value is 20,000 at the end of 20 years. Annual operating cost is 18,000. What is the equivalent uniform annual cost of the machine based on 10% interest rate?
A construction company can purchase a used backhoe for $90,000 and spend $450 per day in operating costs. The equipment will have a 5-year life with no salvage value. Alternatively, the company can lease the equipment for $800 per day. How many days per year must the company use the equipment in order to justify its purchase at an interest rate of 10% per year!
A new engine was installed by a textile plant at cost of P and projected to have a useful life of 10 years. At the end of its useful life, it is estimated to have a salvage value of P32,000. The capitalized cost is P300,000. Determine the first cost P if interest is 13% compounded annually. Express your answer in whole number.
The plant manager has asked you to do a cost analysis to determine when currently owned equipment should be replaced. The manager stated that under no circumstances will the existing equipment be retained longer than two more years and that once it is replaced, a contractor will provide the same service from then on at a cost of $97,000 per year. The salvage value of the currently owned equipment is estimated to be $37,000 now, $30,000 in 1 year, and $19,000 two years from now. The operating cost is expected to be $85,000 per year. Using an interest rate of 10% per year, determine when the defending equipment should be retired
: A construction company had a number of projects and needed to a construction equipment to be used for five years. The company had two choices: the first one included buying the equipment with a price of $50,000; the operation and repair cost is $2,000 a year, and the salvage value is $10,000 at the end of the fifth year. The second option comprised renting the required equipment with amount of $8,000 a year, which is usually paid at the begging of each year and needs $3,000 a year for operation and repair. Specify which option is better for the company? The interest rate is 6%.
A contractor can buy trucks for P950,000 each or rent them for P1,500 per truck. The truck has a salvage value of P100,000 at the end of its useful life of 5 years. The annual maintenance cost is P20,000 per truck. Using the annual cost method and 15% interest rate, determine the minimum number of days per year that each truck must used to warrant its purchase. 194 195 192 193
Engineer Layla purchased a dump truck worth P850,000. She added P50,000for the delivery and other expenses. The said equipment is expected to be useful for 10 years. At the end of its life, it will cost x% of the first cost. Using SLM, its book value at year 5 is P517,500. What is the value of x?
7 A consortium of international telecommunication companies contracted for the purchase and installment of a fiber optic cable linking two major cities at a total cost of US$990 million. The amount includes freight and installation charges estimated at 10% of the above contract price. If the cable shall be depreciated over a period of 16 years with zero salvage value. What is the book value after 4 years using straight line method? Express your answer in whole number.
Show complete solution An existing machine in the factory has an annual maintenance cost of 40,000. A new and more efficient machine will require an investment of 90,000 and it is estimated to have a salvage value of 30,000 at the end of 8 years. Its annual expenses for maintenance is 22,000. If the company's MARR is 12%, will it be worthwhile to purchase the new machine using (a) Present Worth Method? (b) IRR method?
46 A new engine was installed by a textile plant at cost of P and projected to have a useful life of 10 years. At the end of its useful life, it is estimated to have a salvage value of P32,000. The capitalized cost is P350,000. Determine the first cost P if interest is 18% compounded annually.
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