Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 25P
To determine
Calculate the net saving per hour.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
The General Mills Company (GMC) purchased a milling machine for $80,000, which it intends to use for the next five years. This machine is expected to save GMC $37,000 during the first operating year.
Then the annual savings are expected to decrease by 4% each subsequent year over the previous year due to increased maintenance costs. Assuming that GMC would operate the machine for an average
of 4,000 hours per year and that it would have no appreciable salvage value at the end of the five-year period, determine the equivalent dollar savings per operating hour at 8% interest compounded
annually.
Click the icon to view the interest factors for discrete compounding when i = 8% per year.
The equivalent net savings are $ per operating hour. (Round to the nearest cent.)
The General Mills
Company (GMC) purchased a milling
machine for $90,000, which it intends to use
for the next five years. This machine is
expected to save GMC $31,000 during the
first operating year. Then the annual savings
are expected to decrease by 2% each
subsequent year over the previous year due
to increased maintenance costs. Assuming
that GMC would operate the machine for an
average of 4,000 hours per year and that it
would have no appreciable salvage value at
the end of the five-year period, determine
the equivalent dollar savings per operating
hour at 9% interest compounded annually.
The equivalent net savings are $ per
operating hour.
The manager of Automated Products is contemplating the purchase of a new machine that will cost$300,000 and has a useful life of five years. The machine will yield (year-end) cost reductions toAutomated Products of $50,000 in year 1, $60,000 in year 2, $75,000 in year 3, and $90,000 in years4 and 5. What is the present value of the cost savings of the machine if the interest rate is 8 percent?
Chapter 6 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Consider the cash flows in Table P6.7 for the...Ch. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - The repeating cash flows for a certain project are...
Ch. 6 - Beginning next year, a foundation will support an...Ch. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Prob. 17PCh. 6 - Prob. 18PCh. 6 - The Geo-Star Manufacturing Company is considering...Ch. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - Prob. 23PCh. 6 - Prob. 24PCh. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Prob. 28PCh. 6 - Prob. 29PCh. 6 - Prob. 30PCh. 6 - Prob. 31PCh. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Prob. 34PCh. 6 - Prob. 35PCh. 6 - Prob. 36PCh. 6 - Prob. 37PCh. 6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42PCh. 6 - Prob. 43PCh. 6 - Prob. 44PCh. 6 - Prob. 45PCh. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 51PCh. 6 - Prob. 52PCh. 6 - Prob. 53PCh. 6 - Prob. 1STCh. 6 - Prob. 2STCh. 6 - Prob. 3STCh. 6 - Prob. 4ST
Knowledge Booster
Similar questions
- An electronics firm invested $60,000 in a precision inspection device. It cost $4000 to operate and maintain in the first year and $3000 in each of the subsequent years. At the end of 4 years, the firm changed their inspection procedure, eliminating the need for the device. The purchasing agent was very fortunate in being able to sell the inspection device for $60,000, the original price. The plant manager asks you to compute the equivalent uniform annual cost of the device during the 4 years it was used. Assume interest at 6% per year. Please show work, preferably not with excel. Will Upvote!arrow_forwardA semiconductor chip maker purchased a small manufacturing process plant for $2,131,020. The money coming in from that purchase was determined to be $500,000 annually in before-tax cash flow during its 10-year use. The net cash flow after tax is $300,000. If the chip maker wants to realize a 10% return on its investment after tax, for how many more years should the plant operate? (hint, tables)arrow_forwardThe present price (year 0) of kerosene is $4.30 per gallon, and its cost is expected to increase by 10% per year. (At the end of year 1, kerosene will cost $4.73 per gallon.) Mr. Garcia uses about 800 gallons of kerosene for space heating during a winter season. He has an opportunity to buy a storage tank for $600, and at the end of four years, he can sell the storage tank for $100. The tank has a capacity to supply four years of Mr. Garcia's heating needs. So, he can buy four years' worth of kerosene at its present price ($4.30), or he can invest his money elsewhere at 6% interest. Should he purchase the storage tank? Assume that kerosene purchased on a pay-as-you-go basis is paid for at the end of the year. (However, kerosene purchased for the storage tank is purchased now.)arrow_forward
- ENGINEERING ECONOMY - draw a cash flow diagram RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year. The owner of the building put it up for sale at a price of $170,000, but because the firm has been a good tenant, the owner offered to sell it to RKE for a cash price of $160,000 now. If purchased now, how long will it be before the company recovers its investment at an interest rate of 12% per year?arrow_forwardMr. Russ T. Steele sells his old vehicle for $5000 (you get more if you private salel) and pays cash for a used (but newer vehicle) that costs $10,000. He also understands that he needs to allow for maintenance and operation costs of his vehicle. He estimates that these costs will be approximately $2000 a year and estimates that the costs will increase by $100 per year. He hopes to keep the vehicle for five years and then sell it for an estimated value of $2000. Mr. Steele has an MARR of 8%. The present value of the cash flow associated with his purchase is most nearly: Oa. -$7,400 b.$-12,400 C $12,000 Od.-$15,100arrow_forwardAn oil and gas exploration firm invested $2,400,000 in drilling for natural gas in a new gas field. The firm's geologist believes the field has the potential to produce gas for 25 years. The revenue resulting from the gas well the first year after drilling is $740,000; based on previous experiences with similar types of wells, it is expected the annual revenue will decrease at an annual rate of 1%. Likewise, the costs of operating the well the first year totals $160,000; costs are expected to increase at an annual rate of 3%. Based on a 25-year planning horizon and a MARR of 20%, what is the firm's external rate of return for the investment? Click here to access the TVM Factor Table calculator. %arrow_forward
- Jumbo Company uses 1,100 units of an particular item each year. Carrying the item in inventory costs $200 per unit per year. It costs $150 for each order of the chemical. The firm uses the item at a constant rate each year. Calculate the Economic Order Quantity AND Use the data from problem above and assume that Jumbo Company operates 250 days per year. Also assume that its total usage is 1,100 units per year. There is a lead time of 2 days and Jumbo desires to keep a safety stock of 4 units. Calculate the reorder pointarrow_forwardGarnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.arrow_forwardAssume we are selling a product for $2 each. Assume that the variable cost associated with producing and selling the product is 60 cents. Assume that the fixed cost related to the product (the basic costs that are incurred in operating the business even if no product is produced) is $1000. What is the BEP?arrow_forward
- Suppose that you purchase a tractor for $170,000 and sell it in 10 years for $50,000. What is the annualized cost (capital recovery) if your required return on capital is 12%?arrow_forwardA business is looking at a business that has a current value of $25,000,000 – What does this business need to generate as a profit per quarter if the minimum attractive rate of return is 4% per year calculated quarterly over a 7 year period of time.(Hint: 4% in this case is a nominal rate). |arrow_forwardA company is considering purchasing equipment costing $70,000. The equipment is expected to reduce costs from year 1 to 3 by $7,000, year 4 to 8 by $10,000, and in year 9 by $6,000. In year 9, the equipment can be sold at a salvage value of $15,000. Calculate the internal rate of return (IRR) for this proposal. ..... The internal rate of return is %. %6. (Round to the nearest tenth as needed.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education