Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 5, Problem 10P
To determine
Calculate the present worth.
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Your company is considering the purchase of a 30-tonne hoist. The first cost is expected to be $230,000. Net savings will
be $38,000 per year over a 12-year life and will be salvaged for $32,715. If the company's after-tax MARR is 8% and it is
taxed at 45%, what is the future worth (FW) of this project? Note: You will have to calculate the CCA depreciation rate
from the information provided.
A factory manager is considering the purchase of one of the following two production equipment. Cash flow estimates for equipment A are in year-zero dollars while
those of equipment B are in actual dollars.
Equipment A
(year-zero $)
Equipment B
(actual $)
Initial investment
$9,400
$11,400
$4,000
$0
Net annual revenue
$3,000
Market value at end of useful life
$0
Useful life, years
12
12
The manager uses a market interest rate of 12% per year. If inflation rate is expected to average 3.70% per year over the next several years, determine the PW of
each equipment.
1. The PW of Equipment A is
O A. $9,183
O B. $13,208
O C. $12,400
O D. $19,252
2. The PW of Equipment B is
$15,
O B. $18,744
O C. $13,377
O D. $26,802
Item A is currently in use at a plant. The original cost of the piece of machinery was $2,000. Its
maintenance cost is $500 this year, increasing each year by $30. Items A can be replaced by Item
B which has a current cost of $3,500. Item B has no annual maintenance costs, but it is
anticipated that the item purchase cost increases by $50 per year. Disregarding income taxes
effects (such as depreciation), what is the predicted optimum time (after year 'X') to schedule a
replacement of Item A with Item B. Use 8% as the 'interest rate', which really is the value of
money to the company.
a. 5 years
b. 6 years
c. 7 years
d.
8 years
Chapter 5 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - If a project costs 100,000 and is expected to...Ch. 5 - Refer to Problem 5.2, and answer the following...Ch. 5 - Prob. 5PCh. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Consider the cash flows from an investment...Ch. 5 - Prob. 10P
Ch. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Consider the project balances in Table P5.19 for a...Ch. 5 - Your RD group has developed and tested a computer...Ch. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Geo-Star Manufacturing Company is considering a...Ch. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - Prob. 40PCh. 5 - Prob. 41PCh. 5 - Prob. 42PCh. 5 - Two methods of carrying away surface runoff water...Ch. 5 - Prob. 44PCh. 5 - Prob. 45PCh. 5 - Prob. 46PCh. 5 - Prob. 47PCh. 5 - Prob. 48PCh. 5 - Prob. 49PCh. 5 - Prob. 50PCh. 5 - Prob. 51PCh. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - Prob. 56PCh. 5 - Prob. 57PCh. 5 - Prob. 58PCh. 5 - Prob. 59PCh. 5 - Prob. 1STCh. 5 - Prob. 2ST
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