Question
In: Finance
In evaluating a piece of equipment for its optimum replacement interval, the following table of marginal...
In evaluating a piece of equipment for its optimum replacement interval, the following table of marginal costs were calculated. Year 1 2 3 4 5 MC(year1) $11,755 (year 2)$12,390 (year 3)$12,750 (year 4) $12,955 (YEAR 5)$13,425 The best available technology on the market costs $30,000 with projected revenues of O&M of $10,000 and O&M starting at $2500 and increasing $2000 per year. If corporate MARR is 18%, what is your recommendation? [year]
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Find the optimum replacement interval AND the minimum EUAC for each of the scenarios below. Please...
Find the optimum replacement interval
AND the minimum EUAC for each of the
scenarios below.
Please show cash flow diagram and do not use excel
functions.
$225,000 is invested in equipment having a salvage value
that decreases by 25% per year. O&M costs equal $45,000 the
first year and increase by $15,000 per year. Consider a MARR of
15%.
n
EUAC
1
2
3
4
5
6
7
8
9
10
Based on the results obtained, what can you conclude...
Find the optimum replacement interval AND the minimum EUAC for each of the scenarios below. Please...
Find the optimum replacement interval
AND the minimum EUAC for each of the
scenarios below.
Please show cash flow diagram and do not use excel
functions.
$225,000 is invested in equipment having a salvage value
that decreases by 25% per year. O&M costs equal $45,000 the
first year and increase by $30,000 per year. Consider a MARR of
10%.
n
EUAC
1
2
3
4
5
6
7
8
9
10
Based on the results obtained, what can you conclude...
A piece of equipment now is use at a plant is under consideration for replacement. It...
A piece of equipment now is use at a plant is under
consideration for replacement. It has a market value of 8,000. This
market value is expected to decline by 50% per period (from the
previous period) until it reaches zero at the end of period 3. The
estimated operating and repair cost for the next period is 26,000
and this is expected to grow at a rate of 15 percent per period. A
replacement has been located that will...
Sheffield Corp. is considering the replacement of a piece of equipment with a newer model. The...
Sheffield Corp. is considering the replacement of a piece of
equipment with a newer model. The following data has been
collected:
Old Equipment
New Equipment
Purchase price
$215000
$352000
Accumulated depreciation
86000
- 0 -
Annual operating costs
283000
223000
If the old equipment is replaced now, it can be sold for $58000.
Both the old equipment’s remaining useful life and the new
equipment’s useful life is 5 years.
Which of the following amounts is irrelevant to the replacement
decision?...
Joness Industries is considering the replacement of a piece of equipment with a newer model. The...
Joness Industries is considering the replacement of a piece of
equipment with a newer model. The following data has been
collected:
Old equipment
New equipment
purchase price
$150,000
$150,000
Accumulated depreciation
$100,000
$0
Annual operating costs
$70,000
$45,000
If the old equipment is replaced now it can be sold for $15,000.
Both the old equipment's remaining useful life and the new
equipment's useful life is 5 years. The company uses straight-line
depreciation with a zero salvage value for all of...
DT is evaluating an alternative for a new piece of equipment. They estimate the new equipment...
DT is evaluating an alternative for a new piece of equipment.
They estimate the new equipment will cost $164,000, last 4 years,
and have a maintenance and operation cost of $55,000 per year with
no salvage value. Using a MARR of 22% per year, what is the present
worth?
Happy Chappy Ltd are investigating the replacement of an existing piece of equipment with a more...
Happy Chappy Ltd are investigating the replacement of an
existing piece of equipment with a more sophisticated one.
The old equipment cost $100,000 two years ago. It has been
depreciated at a straight-line rate of 20%. If sold today, the old
equipment would sell for $50,000. It has three years of usable life
remaining, but at the end of its life would have zero salvage
value.
The new equipment would cost $150,000 plus $20,000 installation
costs. It would be depreciated...
Rieger International is evaluating the feasibility of investing $94,000 in a piece of equipment that has...
Rieger International is evaluating the feasibility of investing
$94,000 in a piece of equipment that has a 5-year life. The firm
has estimated the cash inflows associated with the proposal as
shown in the following table:
1 $20,000
2 $25,000
3 $40,000
4 $40,000
5 $25,000
The firm has a 9% cost of capital.
a. Calculate the payback period for the proposed
investment.
b. Calculate the net present value (NPV) for the proposed
investment.
c. Calculate the internal rate of...
a) Boulder Milling is evaluating a proposal to invest in a new piece of equipment costing...
a) Boulder Milling is evaluating a proposal to invest in a new
piece of equipment costing $160,000 (salvage value = $10,000) with
the following annual cash flows over the equipment's 4-year useful
life. There is an initial working capital payment of $50,000
required for this equipment.
Cash revenues
Cash expenses
Depreciation expenses (straight-line) Income provided from
equipment Cost of capital
Note: Depreciation is a non-cash expense
$120,000 (64,000) (20,000)
$36,000 12 percent
Periods
Present value of $1
8%
10%
12%...
Rieger International is evaluating the feasibility of investing $90,000 in a piece of equipment that has...
Rieger International is evaluating the feasibility of
investing
$90,000
in a piece of equipment that has a
55-year
life. The firm has estimated the cash inflows associated with
the proposal as shown in the following table:
Year
(t)
Cash inflows (CF)
Copy to Clipboard
+
Open in Excel
+
1
$20 comma 00020,000
2
$25 comma 00025,000
3
$35 comma 00035,000
4
$30 comma 00030,000
5
$30 comma 00030,000
.
The firm has a
88%
cost of capital.
a. Calculate...
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