2. Three mutually exclusive design alternatives are being considered. The estimated sales and cost data for each alternative are given on the next page. The MARR is 20% per year. Annual revenues are based on the number of units sold and the selling price. Annual expenses are based on fixed and variable costs. Determine which selection is preferable based on AW. State your assumptions. A в Investment cost Estimated units 60,000 20,000 $50,000 18,000 to be sold/year Unit selling price, $/unit Variable costs, $/unit Annual expenses (fixed) Market value Useful life $4.40 $4.10 $1.00 $1.40 $1.15 $15,000 $30,000 $26,000 $20,000 10 years $15,000 10 years PUBLICATIOR ÇLA 10 years

2. Three mutually exclusive design alternatives are being considered. The estimated sales and cost data for each alternative are given on the next page. The MARR is 20% per year. Annual revenues are based on the number of units sold and the selling price. Annual expenses are based on fixed and variable costs. Determine which selection is preferable based on AW. State your assumptions. A в Investment cost Estimated units 60,000 20,000 $50,000 18,000 to be sold/year Unit selling price, $/unit Variable costs, $/unit Annual expenses (fixed) Market value Useful life $4.40 $4.10 $1.00 $1.40 $1.15 $15,000 $30,000 $26,000 $20,000 10 years $15,000 10 years PUBLICATIOR ÇLA 10 years

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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3. Evaluate the two machines below, using ROR analysis. Which machine should be selected, if MARR is 10%? Remember, the ROR equation should be set up to ensure equal service. Mach B -15,000 -25,000 -400 6,000 Mach A First cost ($) AOC ($) Salvage value (4) Life (yrs) -1,600 3,000 6
Complete the following analysis of cost alternatives and select the preferred alternative. The s A D Сapital investment $15,000 S16,000 $13,000 $18,000 Annual costs Market value 250 300 500 100 1,000 1,300 1,750 2,000 at EOY 10 FW(12%) -$49,975 –$53,658 ??? –$55,660 tudy period is 10 years and the MARR = 12% per %3D year.
Fiesta Foundry is considering a new furnace that will allow them to be more productive. Three alternative furnaces are under consideration. Perform an incremental analysis of these alternatives using the IRR method for each increment of cash flows. The MARR is 10% per year. E Click the icon to view the description of the alternatives. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year. Perform the incremental PW Analysis. Fill-in the table below (Hint: Order alternatives by increasing capital investment). (Round to the nearest dollar.) Incremental Investment Inc. PW Alternative to be selected A V A
PW values of a project were calculated for several values of (i). The results were plotted as shown in the figure. a. What are the values of ROR (i*) for this project? Put 100 integer number followed immediately by% 75 1- 50 25 2- 10 20 30 40 50 b. If this project is a public sector project (i.e. its ROR is low). What value should we choose as the ROR for the 50 project? Put integer number followed immediately 75 by% 100 (O00TS x) Md
For th below two machines and based on CC analysis which machine we should select? MARR=10% Machine A Machine B First cost, $ Annual cost, $/year Salvage value, $ Life, years 3 Answer the below question: B- the CC for machine B= 20,538 11,820 7,655 infinite 113,798 8,894
Required information PEMEX, Mexico's petroleum corporation, has an estimated budget for oil and gas exploration that includes equipment for three offshore platforms as shown. Use PW analysis to select the best alternative at a MARR of 16% per year. Platform First cost, $ million Y Z -300 -450 -510 M&O, $ million per year -320 -290 -230 Salvage value, $ million 75 50 90 Estimated life, years 20 20 20 Select platform X, Y, or Z using tabulated factors. The present worth of platform X is $- 2298.4 worth of platform Z is $- 1944.14 million, the present worth of platform Y is $- 2262.15 million, and the present million. The platform selected based on the present worth is platform Z
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An electronics firm is planning to manufacture a new handheld gaming device for the preteen market. The data have been estimated for the product. Assuming a negligible market (salvage) value for the equipment at the end of five years, determine the breakeven annual sales volume for this product.
Problem 2: For the cash flows shown, determine the incremental cash flow between machines B and A. Machine A First Cost, $ -13,000 -25,000 AOC, $ per Year Salvage Value, $ Life, Years -2,000 -400 3,000 6,000 3
An industrial plant has hired a contractor to develop a solar farm nearby for the industrial plant's electricity consumption. During the 3-year construction period, the contractor will need to run a generator to power the construction. Cost analysis from previous projects indicates: Generator Brand Installed Cost Cost per Hour A $22M $500 B $23M $400 C $25M $250 D $30M $150 At the end of 3 years, the generator will have a salvage value equal to the cost of removing them. The generator will operate 6,000 hours per year. The lowest interest rate at which the contractor is willing to invest money is 7%. (The minimum required interest rate for invested money is called the minimum attractive rate of return, or MARR.) Select the alternative with the least present worth of cost. O Choice "C" with $29,872,900 O Choice "B" with $29,298,320 O Choice C with $28,936,450 O Choice "A" with $29,872,900
Marmara Processing Technologies Company wants to buy milling cutters in order to meet its increasing production needs. As a result of the studies, the data in the table below were found. According to these data, what will be the current cost of the annual operating expense parameter of alternative B? A Purchase Cost 10.000 12.000 Annual Operating Expense 1.500 1.700 Scrap Values 2.000 3.000 Economic Life 4 4 Capital Cost 10% 10%
1. The example in the previous chapter, National Homebuilders, Inc. evaluated cut-and-finish equipment from vendor A (6-year life) and vendor B (9-year life). The PW analysis used the LCM of 18 years. Consider only the vendor A option now. The cash diagram shows the cash flows for all three life cycles (first cost $-15,000; annual M&O costs $-3500; salvage value $1000). Demonstrate the equivalence at i= 15% of PW over three life cycles and AW over one cycle. In previous example, present worth for vendor A was calculated as PW = $-45,036. cost (A) income year net cash flow 0 -15000 0 -15000 1 -3500 0 -3500 2 -3500 0 -3500 3 -3500 0 -3500 4 -3500 0 -3500 5 -3500 0 -3500 6 -18500 1000 -17500 7 -3500 0 -3500 8 -3500 0 -3500 9 -3500 0 -3500 10 -3500 0 -3500 11 -3500 0 -3500 12 -18500 1000 -17500 13 -3500 0 -3500 14 -3500 0 -3500 15 -3500 0 -3500 16 -3500 0 -3500 17 -3500 0 -3500 18 -3500 1000 -2500 ($45,036.36) annual W ($7,349.32)