Question
In: Finance
A construction contractor needs to choose between two suppliers of dump trucks. Supplier 1 has an...
A construction contractor needs to choose between two suppliers of dump trucks. Supplier 1 has an initial cost of $125,000 and annual operating cost of $25, 000 per year. Supplier 2 has initial cost $160,000 and has annual operating cost of 20,000 per year. The truck fleet has the same 10-year life forecast Based on incremental rate of return (IROR) and a MARR of 8%, and which supplier of trucks should the contractor choose?
Please do not use excel.
Solutions
Expert Solution
| Calculation of Present Value of the maintaing the each truck | ||||||
| Year | Supplier 1 Truck | Supplier 2 Truck | ||||
| Cash Flow | Discount Factor@8% | Discounted Cash Flows | Cash Flow | Discount Factor@8% | Discounted Cash Flows | |
| A | B | C = 1/(1+8%)^A | D = B*C | E | F = 1/(1+8%)^A | G = E*F |
| 0 | -125000 | 1 | -125000 | -160000 | 1 | -160000 |
| 1 | -25000 | 0.925925926 | -23148.14815 | -20000 | 0.925925926 | -18518.51852 |
| 2 | -25000 | 0.85733882 | -21433.47051 | -20000 | 0.85733882 | -17146.77641 |
| 3 | -25000 | 0.793832241 | -19845.80603 | -20000 | 0.793832241 | -15876.64482 |
| 4 | -25000 | 0.735029853 | -18375.74632 | -20000 | 0.735029853 | -14700.59706 |
| 5 | -25000 | 0.680583197 | -17014.57993 | -20000 | 0.680583197 | -13611.66394 |
| 6 | -25000 | 0.630169627 | -15754.24067 | -20000 | 0.630169627 | -12603.39254 |
| 7 | -25000 | 0.583490395 | -14587.25988 | -20000 | 0.583490395 | -11669.80791 |
| 8 | -25000 | 0.540268885 | -13506.72211 | -20000 | 0.540268885 | -10805.37769 |
| 9 | -25000 | 0.500248967 | -12506.22418 | -20000 | 0.500248967 | -10004.97934 |
| 10 | -25000 | 0.463193488 | -11579.8372 | -20000 | 0.463193488 | -9263.869762 |
| Present Value | -292752.035 | -294201.628 | ||||
| Present Value of Owning supplier 1 Truck is $292,752.04 | ||||||
| Present Value of Owning supplier 2 Truck is $294,201.63 | ||||||
| Therefore, Contractor should choose Supplier 1 of trucks |
jeff jeffy answered 1 year agoRelated Solutions
A contractor has the opportunity to choose between building a house or doing two
A contractor has the opportunity to choose between building a house or doing two extension works in the next 6 months. If you build the house and sell it, you can make $25,000. However, if the housing market is affected by the increase in mortgage interest rates and would lose $5,000. On the other hand, you can earn $17,000 by performing both expansion jobs, regardless of market behavior. Based on excel QM which matrix would you deal with? a) Develop...
1. A contractor needs water at a remote construction site for a five year project. A...
1. A contractor needs water at a remote construction site for a
five year project. A pipeline from a river,six miles away, will
supply the water. The cost of the pipeline and the cost of pumping
the water will vary with pipe size. See table below. The contractor
uses a MARR of 7%. The contractor plans to work 2000 hours per
year, and that is the time the pump will run each year. At the end
of five years the...
your manager has asked you to analyze the purchase of some dump trucks. each truck will...
your manager has asked you to analyze the purchase of some dump
trucks. each truck will cost 45000$ and have an operating and
maintenance cost starting 15000$ the first year and increase by
2000$ per year. assume the salvage value at the end of 5 years is
9000$ and interest rate 12% . what is the equivalent annual cost of
each truck
The number of days required for two suppliers to deliver orders is as follows. Supplier A:...
The number of days required for two suppliers to deliver
orders is as follows.
Supplier A:
10.0
4.0
13.0
1.0
17.0
7.0
11.0
16.0
6.0
19.0
Supplier B:
9.0
4.0
13.0
2.0
23.0
8.0
12.0
15.0
6.0
24.0
(A) Which supplier provides more consistent and
homogenous delivery times A or B? ...
Average Number of Days for Supplier A = days,
and Standard Deviation = day.
Coefficient of Variation for Supplier A =
Average Number of Days for Supplier B = days,
and...
The number of days required for two suppliers to deliver orders is as follows. Supplier A:...
The number of days required for two suppliers to deliver
orders is as follows.
Supplier A:
10.0
4.0
13.0
1.0
17.0
7.0
11.0
16.0
6.0
19.0
Supplier B:
9.0
4.0
13.0
2.0
23.0
8.0
12.0
15.0
6.0
24.0
(A) Which supplier provides more consistent and
homogenous delivery times A or B? ...
Average Number of Days for Supplier A = days,
and Standard Deviation = day.
Coefficient of Variation for Supplier A =
Average Number of Days for Supplier B = days,
and...
Arlan needs to choose between the two candidates that he had for a job as the...
Arlan needs to choose between the two candidates that he had
for a job as the new Manager in his new carwash branch. Jane is
currently due for a promotion in her current company and is earning
$42,000 yearly. She is willing to relocate, but does not tolerate
working during weekends as she has 3 small children at home. She
has a very good leadership and interpersonal skills. On the other
hand, Betts who is very good in finance earns...
You have two suppliers for electrical components. The first supplier has sent you 57 parts, of...
You have two suppliers for electrical components. The first
supplier has sent you 57 parts, of which 5 have failed. The second
supplier has sent you 64 parts, of which 8 have failed. Test the
proportion of failures to see if the suppliers are equal in failure
rate. Don’t use a significance level, instead report a p-value and
give an interpretation of that result.
Part 2 – Construction Cost A sub-contractor needs to decide which companies they should hire for...
Part 2 – Construction Cost
A sub-contractor needs to decide which companies they should
hire for each type of building they want to construct.
Below is the estimated time it should take (in hours) for each
of the different types of buildings they work on.
Building
Excavating
Framing
Electrical
Plumbing
Finishing
Office Space
45
100
88
132
312
School
56
250
147
28
290
Apartments
84
480
75
125
244
Grocery Store
95
160
26
78
236
Below are the...
A manufacturer receives parts from two suppliers. An SRS of 400 parts from supplier 1 finds...
A manufacturer receives parts from two suppliers. An SRS of 400
parts from supplier 1 finds 20 defective; an SRS of 100 parts from
supplier 2 finds 10 defective. Let p1 and
p2 be the proportion of all parts from
suppliers 1 and 2, respectively, that are defective. Is there
evidence of a difference in the proportion of defective parts
produced by the two suppliers? To make this determination, you test
the hypotheses H0 : p1 =
p2 and Ha...
A contractor must choose between buying or renting a crane for the duration of a 5...
A contractor must choose between buying or renting a crane for
the duration of a 5 year construction project. The contractor uses
an MARR of 8%. At the end of the project, the crane can be sold for
26% of its initial cost. The cost to operate and maintain the crane
is $210,000 per year. Renting the crane costs $330,000 per year
including all operating and maintenance costs. Determine the
maximum amount the contractor should pay to purchase the crane...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- The following are the monthly rates of return for Madison Cookies and for Sophie Electric during...
- 1.) Think back to August 6, 1945. The United States has just dropped an atomic weapon...
- Carry out the equipment and operating procedures between injection molding of thermoplastics and injection molding of...
- The cumulative timing approach was used to time a job and its elements. Use the following...
- absorption refection scattering refraction and diffraction can all have an impact on RF signal strength. Identify...
- This is my code I need to complete it? //The code package arraylists; import java.util.ArrayList; import...
- Organization management function at Tesla, and how can they improve the structure
ADVERTISEMENT