Question

You plan to operate the same type of machine for 12 years. Machine A lasts 4 years and Machine B lasts 6 years. Machine A costs $11,000 and Machine B costs $15,000. The salvage value of Machine A is $3,000 and the salvage value of Machine B is $1,700. Annual operation and maintenance costs are $5,000 for Machine A and $3,900 for Machine B. Both machines can be purchased in the future at the same price as today, and their salvage values and annual costs will remain as they are now. Your MARR is 14.5%. Enter the Annual Equivalent Cost (AEC) as a POSITIVE number for the machine that should be selected

Answer #1

"You plan to operate the same type of machine for 12 years.
Machine A lasts 4 years and Machine B lasts 6 years. Machine A
costs $8,000 and Machine B costs $12,000. The salvage value of
Machine A is $4,000 and the salvage value of Machine B is $2,000.
Annual operation and maintenance costs are $3,000 for Machine A and
$3,500 for Machine B. Both machines can be purchased in the future
at the same price as today, and their...

"You plan to operate the same type of machine for 10 years.
Machine A lasts 5 years and Machine B lasts 10 years. Machine A
costs $7,000 and Machine B costs $9,000. The salvage value of
Machine A is $3,000 and the salvage value of Machine B is $1,600.
Annual operation and maintenance costs are $2,000 for Machine A and
$2,400 for Machine B. Both machines can be purchased in the future
at the same price as today, and their...

Machine A lasts 5 years and Machine B lasts 10 years. Machine A
costs $6,000 and Machine B costs $9,000. The salvage value of
Machine A is $4,000 and the salvage value of Machine B is $2,200.
Annual operation and maintenance costs are $5,000 for Machine A and
$3,900 for Machine B. Both machines can be purchased in the future
at the same price as today, and their salvage values and annual
costs will remain as they are now. Your...

"Your company needs a machine for the next 20 years. You are
considering two different machines.
Machine A
Installation cost ($): 2,500,000
Annual O&M costs ($): 77,000
Service life (years): 20
Salvage value ($): 79,000
Annual income taxes ($): 65,000
Machine B
Installation cost ($): 1,250,000
Annual O&M costs ($): 107,000
Service life (years): 10
Salvage value ($): 46,000
Annual income taxes ($): 45,000
If your company s MARR is 14%, determine which machine you should
buy. Assume that machine...

5.30 A company needs to purchase a new machine to maintain its
level of production. The company is considering three different
machines. The costs, savings and service life related to each
machine are listed in the table below.
Machine A
Machine B
Machine C
First Cost
$37,500
$31,000
$35,000
Annual Savings
$13,500
$12,000
$12,750
Annual Maintenance
$3,000 the first year
and increasing by
$600 every year
thereafter
$2,500
$2,000
Salvage Value
$5,000
$11,000
$13,000
Service Life
6 years
3 years...

A company is considering replacing the computer it currently uses. It was 3 years ago at a cost of $ 10,000. The operation and maintenance costs for that computer have been and will remain in the future at $ 1,000 per year. If a new computer is purchased, a bonus of $5,000 would be obtained in exchange for the current one. The cost of the new computer is $15,000 with an estimated useful life of 5 years and a salvage...

Jubail Corporation has just purchased a new CAD Machine for
$35,000 to replace old machine that had a salvage value of $
15,000. The useful life of the new machine is 10 years. The machine
generates annual sales of $10,000 and has annual maintenance cost
of $5,000. Calculate the Payback period using Discounted Payback
method, If Jubail's MARR (minimum acceptable rate of return) is
15%:
A. 8.12 Years
B. 6.57 Years
C. 8.57 Years
D. 11.05 Years

Machine A costs $30,000 to purchase and is worth $9,000 in 5
years. Machine B costs $15,000 to purchase and is worth $2,000 in 2
years. Assume that these machines are needed for 20 years and can
be repurchased at the same price in the future. (use 13% interest
rate)
Compute the Annual Equivalent Cost of each machine and subtract
those values. Record the difference as a POSITIVE if Machine A is
best, or a NEGATIVE if Machine B is...

You are considering building waste treatment plan. The project
lasts 40 years and occurs construction costs of $100 (all numbers
are in millions of $). Annual operation cost is $8, and annual
operation benefit is $15. Assume constant interest rest of 4.5%
a) Using annuity formula compute annuity factor, PV of benefits,
PV of costs, NPV of the project.
b) (Sensitivity analysis) What is the minimum annual benefit
needed to keep the project desirable? (NPV>0)

Machine X has an initial cost of $12,000 and annual maintenance
of $700 per year. It has a useful life of four years and no salvage
value at the end of that time. Machine Y costs $22,000 initially
and has no maintenance costs during the first year. Maintenance is
$200 at the end of the second year and increases by $200 per year
thereafter. Machine Y has a useful life of eight years and an
anticipated salvage value of $5,000...

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