CHAPTER 5B PRESENT WORTH ANALYSIS Problem 5-2 to 5-4 Dunn Manufacturing is considering the following two alternatives. The cost information for the two proposals for replacing an equipment are provided are in table below. | | Machine X | Machine Y | | :--- | :--- | :--- | | Initial cost | $120,000 | $96,000 | | Benefits/year | $20,000 for the first 10 years and $9,000 for the next 10 years | $12,000 per year for 20 years. | | Life | 20 years | | | Salvage value | $40,000 | $20,000 | | MARR | 8% | | Problem 5-2 The NPW of machine X is __________. Problem 5-3 The NPW of machine Y is __________. Problem 5-4 If machine ?Y? has no salvage value, what would be the NPW of machine ?Y??
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Machine A which is a basic model costs $25,000 and lasts 5 years. At the end of the 5 years it has a salvage value of $1,500 and its market value at the end of 3 years is $7,000. An enhanced model, Machine B sells for $36,000 and has a life of 8 years with a salvage value of $8,500. The benefit that these two machines are anticipated to provide is $9,500 per year, indefinitely. Looking at an 8-year window with a rate of 2% APR compounded yearly, what is the difference between the net present worth of Machine B over Machine A? (Hint: the second copy of Machine A can be sold at the end of the 8th year for the price that it will command after a 3-year life.)
Akash M.
A machine costing $206,800 with a four-year life and an estimated $16,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 477,000 units of product during its life. It actually produces the following units: 122,700 in the 1st year, 123,000 in the 2nd year, 120,500 in the 3rd year, and 120,800 in the 4th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.) Required: Compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method. (Round your per unit depreciation to 2 decimal places. Round your answers to the nearest whole dollar.)
Manasvee S.
As machines get older, the cost of maintaining them tends to increase. Suppose for a particular machine, the rate at which the maintenance cost is increasing is approximated by the function C'(t) = (4t + 28) (√(0.5t^2 + 7t)) for 0 < t < 15, where C is the maintenance cost in dollars and t is the number of years since the purchase. The company will sell or scrap the machine in 15 years and buy a new one if the cost to maintain it in its last year of service is projected to exceed $1250. Round all answers to the nearest cent. a. What is the total expected cost to maintain this machine over its first 2 years of service? b. What is the total expected cost to maintain this machine in its last year of service? c. Should the company keep or scrap the machine? d. How many times more expensive is it to maintain the machine in its last year of service than its first year of service? Round your answer to the nearest tenth.
Jessica M.
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