Question
In: Accounting
A company is looking into two types of compressors to replace an aging compressor. The data...
A company is looking into two types of compressors to replace an aging compressor. The data in the table below has been compiled for comparison
| Centrifugal Compressor | Reciprocating Compressor | |
| Installed Cost | $2,000,000 | $850,000 |
| Annual O&M costs | $50,000 | $150,000 |
| Service Life in years | 15 | 8 |
| Salvage Value | $80,000 | $60,000 |
If the firm's MARR is known to be 16%, which option will you recommend?
Solutions
Expert Solution
| Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks! |
| Particulars | Centrifugal | Reciprocating | Note |
| Cost of Project | 2,000,000.00 | 850,000.00 | A |
| Annual O&M costs | 50,000.00 | 150,000.00 | B |
| Salvage Value | 80,000.00 | 60,000.00 | C |
| Life | 15.00 | 8.00 | D |
| Annuity factor at 16% | 5.5755 | 4.3436 | E |
| Present Value of Annual O&M costs | 278,772.81 | 651,538.63 | F=B*E |
| Present Value at 16% | 0.1079 | 0.3050 | G |
| Present Value of Salvage Value | 8,634.16 | 18,301.53 | H=C*G |
| Net Present Value | 2,270,138.65 | 1,483,237.11 | I=A+F-H |
| Net cost of Reciprocating Compressor is less so it should be accepted. | |||
ekkarill92 answered 1 year agoRelated Solutions
Samir heads a team to select from two different machines to replace an aging one. Their...
Samir heads a team to select from two different machines to
replace an aging one. Their upfront costs, such as installation,
are different. Also their useful lives are 4 years and 5 years
respectively. Their salvage values, operating costs and net
benefits are different. Nonetheless, they each have pros and cons
to consider.
Tammy, a junior engineer, has suggested using the equivalent
annual annuity (EAA) method to compare each machine’s financial
attributes.
Describe how the EAA method works by creating...
You are looking to purchase the DeWalt air compressor. Assuming the compressor operates (outputs) air at...
You are looking to purchase the DeWalt air compressor. Assuming
the compressor operates (outputs) air at 90psi and at 110F. If the
atmospheric pressure is 0 psig and the atmospheric temperature is
65F, how much free air will the compressor consume in cubic feet
(ft3 )/Minute to handle the 5 standard cubic feet per minute
(SCFM)? • DeWalt Specifications -- 1.6 HP electric engine gets the
job done. High-pressure motor with consistent draw requirements can
be run with a 12-Gauge...
(c) Sur Power & Utility company is considering to replace the existing high power ammonia compressor...
(c) Sur Power & Utility company is considering to replace
the existing high power ammonia compressor with a new one.
Maintenance records show the relative frequency of the compressor
for 300 week period is given in Table Q5(c)-1.
(i) Use Monte Carlo Simulation, the probability distributions and
the random numbers given in Table Q5(c)-2, to simulate the
breakdowns which occur in the next 25 week lifespan.
Calculate the average number of breakdowns. Decide which blower
will have the better reliability...
The CSI Corporation is looking to replace an existing printing press with one of two newer...
The CSI Corporation is looking to replace an existing printing
press with one of two newer models that are more efficient. The
current press is three years old, cost 32,000 and is being
depreciated under MACRS using a 5-year recovery period. The first
alternative under consideration, Printing Press A, cost $40,000 to
purchase and $8,000 to install. It has a 5 year usable life and
will be depreciated under MACRS using a 5-year recovery period. The
second alternative, press B...
The Fox Corporation is looking to replace an existing printing press with one of two newer...
The Fox Corporation is looking to replace an existing printing
press with one of two newer models that are more efficient. The
current press is three years old, cost 32,000 and is being
depreciated under MACRS using a 5-year recovery period. The first
alternative under consideration, Printing Press A, cost $40,000 to
purchase and $8,000 to install. It has a 5 year usable life and
will be depreciated under MACRS using a 5-year recovery period. The
second alternative, press B...
The CSI Corporation is looking to replace an existing printing press with one of two newer...
The CSI Corporation is looking to replace an existing printing
press with one of two newer models that are more efficient. The
current press is three years old, cost 32,000 and is being
depreciated under MACRS using a 5-year recovery period. The first
alternative under consideration, Printing Press A, cost $40,000 to
purchase and $8,000 to install. It has a 5 year usable life and
will be depreciated under MACRS using a 5-year recovery period. The
second alternative, press B...
The Fox Corporation is looking to replace an existing printing press with one of two newer...
The Fox Corporation is looking to replace an existing printing
press with one of two newer models that are more efficient. The
current press is three years old, cost 32,000 and is being
depreciated under MACRS using a 5-year recovery period. The first
alternative under consideration, Printing Press A, cost $40,000 to
purchase and $8,000 to install. It has a 5 year usable life and
will be depreciated under MACRS using a 5-year recovery period. The
second alternative, press B...
The Rauzi Company is looking to replace an existing computer system with a new, more efficient...
The Rauzi Company is looking to replace an existing computer
system with a new, more efficient system. They feel the new will
increase cash flow.
The new system will cost $435,000 today and have a 4 year
production life. It will be depreciated using 100% bonus
depreciation with an estimated salvage value of $175,000 at the end
of its production life. The project will also set aside $15,000 for
working capital.
The old computer is currently two years old and...
The TP Company is looking to replace an existing machine with a new, more efficient version....
The TP Company is looking to replace an existing machine with a
new, more efficient version. TP feels the new will extend the
production life by one year while increasing cash flows. The new
machine will cost $150,000 today and have a 6 year production
life.It will be depreciated as 5-year MARCS property with an
estimated salvage value of $20,000 at the end of its production
life. The project will also set aside $6,000 for working capital.
The old machine...
1) What is the difference of dynamic compressor (blowers) and normal compressor? Name 2 types of...
1) What is the difference of dynamic compressor
(blowers) and normal compressor? Name 2 types of pump from each
category
2 )Sketch and explain two types of blowers;
Subject ( Application of Pneumatic and Hydraulics)
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Part A. Outline and explain all the VARIABLES and FACTORS that determine valuation and valuation analysis...
- Study the file polygon.h. It contains the header file for a class of regular polygons. Implement...
- what challenges can myths and stereotypes create for american indians?
- Date accuracy is very important because dates are used for discounts, payment terms and many reports....
- How many milliliters of concentrated hydrochloric acid solution (36.0% HCl by mass, density = 1.18 g/mL)...
- How does the rotating membership of the FOMC work? Why does the president of New York's...
- A gym owner is considering opening a location on the other side of town. The new...
ADVERTISEMENT