6-44 Which car has a lower EUAC if the owner can earn 5% in his best investment? Contributed by Paul R. McCright, University of South Florida A Initial cost Annual maintenance Annual gas & oil (increasing 15% yearly) Salvage value (Year 8) Midsize Hybrid $19,200 $25,500 1,000 1,500 2,500 1,200 8,000 10,000

6-44 Which car has a lower EUAC if the owner can earn 5% in his best investment? Contributed by Paul R. McCright, University of South Florida A Initial cost Annual maintenance Annual gas & oil (increasing 15% yearly) Salvage value (Year 8) Midsize Hybrid $19,200 $25,500 1,000 1,500 2,500 1,200 8,000 10,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6-4 A An electronics firm invested $60,000 in a precision inspection device. It cost $4000 to operate and main- tain in the first year and $3000 in each later year. At the end of 4 years, the firm changed their inspec- tion procedure, eliminating the need for the device. The purchasing agent was very fortunate to sell the inspection device for $60,000, the original price. Compute the equivalent uniform annual cost during the 4 years the device was used. Assume interest at 10% per year.
9-83 Assume a cost improvement project has only a first cost of $100,000 and a monthly net savings, M. There is no salvage value. Graph the project's IRR for payback periods from 6 months to the project's life of N years. The firm accepts projects with a 2- year payback period or a 20% IRR. When are these standards consistent and when are they not? (a) Assume that N = 3 years. (b) Assume that N = 5 years. (c) Assume that N = 10 10 years. (d) What recommendation do you have for the firm about its project acceptance criteria?
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?
A company is deciding whether to lease or buy a new truck. Given the information provided below, if the company finds out the truck maintenance cost is $3000 incurred by the lessor only, and paid at the end of each year. Net Advantage of lease (NAL) Tax CCA $2,500 30% 40% Salvage $2,000 Cost of Debt 10% Useful life time 6 years The Company should (buy / lease) A/ the truck.
3. A company is going to buy a new machine for manufacturing its product. Four different machines are available. Cost, operating and other expenses are as follows: A B C First cost 52,000 49,600 30,000 24,000 Power per year 1,300 1,360 2,400 2,020 Labor per year 11,600 9,320 4,200 2,000 Maintenance per year 2,800 1,900 1,300 700 Taxes and insurance 3% 3% 3% 3% Life, years 5 5 5 Money is worth 15 % before taxe the company. Which machine should be chosen? Use Rate of return on Additional Investment and Present worth method.
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 $5M for this year. Alternatively, based on the projection from the marketing department, you may reduce the sales volume decline from 10% to 5% if the price is kept unchanged. The product will be discontinued at the end of year 5 for both scenarios. If the firm's TVOM is 10%, Determine the revenue cash flow streams for both alternatives. What is the Excel financial function to compute PW of the revenue streams
A 7% D 5% - M - M 100 150 200 300 Money ($ million) Interest rate (%)
3) The cost of painting the public bridge is $15000. If the bridge is painted now and every 7 years, what is the capitalized cost (CC) of painting at an interest rate of 10% per year. a.-16650 b.-155000 c.-35750 d. -55990 e.-31500
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7- An equipment costs $30000.00 to install, has a maintenance cost of $500.00 per year, provides for $6000.00 savings each year for 10 years, and has a salvage value of $3000.00 after 10 years. If the interest rate is 8%, the net present worth of this equipment is: a) $10156.90 b) $9905.00 c) -$28475.10 d) $8294.60
Faro laser trackers are portable contact measurement systems that use laser technology to neaiure large parts and machinery to accuracies of 0.0002 inches across a wide range of industrial applications. A customer that manufactures and installs cell phone relay dishes and satellite receivingstations reported the cash flows (in $ thousands) for one of its product lines. Year Expense $ Recipts $ 0 -3000 0 1 -1500 2900 2 -4000 5700 3 -2000 5500 4 -1300 1100 a. Determine the number of possible rate of return valuesb. Calculate a MIRR value for the cash flow, when the cost of capital is 15% and the reinvestment rate is 10%. Develop full expressions for PW, FW and MIRR, using conversion factors.