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Finance
Two insulation thickness alternatives have been proposed for a process steam line subject I to severe weather conditions. One alternative must be: selected. Estimated savings in heat loss and
Refer to Problem 6-38. Which thickness would you recommend if the study period was four years? Use the imputed market value technique to estimate the market value of the 5 cm alternative after j four
A manufacturing firm is evaluating three automated machines. The estimated production rate and cost data for each machine are given below. The MARR is 15% per year.Annual revenues are based on the
a. Compare the probable part cost from Machine A and Machine B, assuming that each will make the part to the same specification. Which machine yields the lowest part cost? Assume that the MARR = 10%
Two mutually exclusive electrostatic precipitators (ESP) are being considered as additions to the environmental protection equipment at a power generating company. One of these alternatives must be
A "greenway" walking trail has been proposed by the city of Richmond. Two mutually exclusive alternative locations for the 2-meter-wide trail have been proposed: one is on flat terrain and is 14
Your rich uncle has offered you two living trust payouts for the rest of your life. The positive cash flows of each trust are shown below. If your personal MARR is 10% per year, which trust should
A firm is considering three mutually exclusive alternatives as a part of the upgradation of an existing manufacturing process.At EOY 6, alternative 3 would be replaced with another alternative 3,
A high-pressure pump at a methane gas (biofuel) plant in Memphis costs $30,000 for installation and has an estimated life of 12 years. By the addition of a specialized piece of auxiliary equipment,
Use the CW method to determine which mutually exclusive bridge design (L or H) to recommend, based on the data provided in the accompanying table. The MARR is 15% per year.
It has been decided that whole body scanning technology will be used for airport security purposes. Two types of devices are being considered at a certain airport (only one will be selected): back
Two proposals have been offered for streamlining the business operations of a customer call center. Proposal A has an investment cost of $30,000, an expected Hie of five years, property taxes of $450
An airport needs a modern material handling system for facilitating access to and from a busy maintenance hanger. A second-hand system will cost $75,000. A new system with improved technology can
Consider these mutually exclusive alternatives. MARR = 8% per year, so all the alternatives are acceptable.a. At the end of their useful lives, alternatives A and C will be replaced with identical
The U.S. Border Patrol is considering two remotely operated, solar-powered surveillance systems for a popular border crossing point. One system must be chosen and the study period is indefinitely
A firm is considering three mutually exclusive alternatives as part of an upgrade to an existing transportation network.At EOY 10, alternative III would be replaced with another alternative III
The migration of Asian carp into the i Great Lakes must be stopped. Two mutually exclusive alternatives with different useful lives have been proposed to keep the carp from travelling further
Use the ERR method incrementally to decide whether project A or project B should be recommended. These are two mutually exclusive cost alternatives, and one of them must be selected. The MARR is 5%
Refer to Problem 6-52. Suppose the study period has been coterminated at 10 years. Use the imputed market value technique and determine which alternative is the most economical.In problem
You have been requested to offer a recommendation of one of the mutually exclusive industrial sanitation control systems that follow. If the MARR is 15% per year, which system would you select? Use
A single-stage centrifugal blower is to be selected for an engineering design application. Suppliers have been consulted, and the choice has been narrowed down to two new models, both made by the
A high-quality filter for tap water and a 3 reusable drinking container cost $75 and typically will last for three years. If a family drinks an average of eight cups of water per day (one cup is 8
You have been asked to evaluate the economic implications of various methods for cooling condenser effluents from a 200-MW steam-electric plant. In this regard, cooling ponds and once-through cooling
Your FICO score makes a big difference in how lenders determine what interest rate to charge you. Consider the situation faced by Edward and Jorge. Edward has a fairly poor FICO score of 660 and, as
Automobile repair shops typically remind customers to change their oil and oil filter every 3,000 miles. Let's call this Strategy 1. Usually you can save money by following another legitimate
On your student loans, if possible, try to make interest-only payments while you are still in school. If interest is not repaid, it folds into principal after graduation and can cost you hundreds (or
A 30-year fixed rate-mortgage is available now at 7% APR. Monthly payments (360 of them) will be made on a $200,000 loan. The realtor says that if you wait several months to obtain a mortgage, the
A certain U.S. government savings bond can be purchased for $7,500. This bond will be worth $10,000 when it matures in five years. As an alternative, a 60-month certificate of deposit (CD) can be
Your university advertises that next year's "discounted" tuition of $8,000 can be paid in full by July 1. The other option is to pay the first semester's tuition of $4,200 by July 1, with the
Bob and Sally have just bought a new house and they are considering the installation of 10 compact fluorescent bulb (CFB) fixtures instead of the 10 conventional incandescent lighting fixtures (which
Three models of baseball bats will be manufactured in a new plant in Pulaski. Each bat requires some manufacturing time at either Lathe 1 or Lathe 2, according to the following table. Your task is to
Refer to Example 6-3. Re-evaluate the recommended alternative if (a) The MARR = 15% per year; (b) The selling price is $0.50 per good unit; (c) Rejected units can be sold as scrap for $0.10 per unit.
Wilbur is a college student who desires to establish a long-term Roth IRA account with $4,000 that his grandmother gifted to him. He intends to invest the money in a mutual fund that earns an
Three mutually exclusive project alternatives are being evaluated. The estimated cash flows for each alternative are given below. The MARR is 15% per year. At the conclusion of its useful life the
Create a spreadsheet to solve Example 6-11. What would the capital investment amount for pump SP240 have to be such that the firm would be indifferent as to which pump model is selected?
Using the data from Problem 6-7, create a spreadsheet to identify the best design using an IRR analysis.In problem 6-7
What other factors might you include in such an analysis? Should projected revenues be included in the analysis?
Go to your local grocery store to obtain the price of ice cream packaged in different-sized containers. Use this information (along with additional assumptions you feel necessary) to make a
You can earn thousands of dollars more from your mutual funds. The secret is to purchase no-load (no front-end commission) funds directly from companies specializing in this area. You can save 5.75%
The Tree Top Airline (TTA) is a small feeder-freight line started with very limited capital -to serve the independent petroleum operators in the arid Southwest. All of its planes are identical,
Complete the following analysis of investment alternatives and select the preferred alternative. The study period is three years and the MARR = 15% per year.(a) Alternative A (b) Alternative B (c)
Complete the following analysis of cost alternatives and select the preferred alternative. The study period is 10 years and the MARR = 12% per year. "Do Nothing" is not an option.(a) Alternative
The Ford motor company is considering three mutually exclusive electronic stability control systems for protection against rollover of its automobiles. The investment period is four years (equal
Your boss has asked you to evaluate the economics of replacing 1,000 60-Watt 1,000 compact incandescent light bulbs (ILBs) with fluorescent lamps (CFLs) for a particular lighting application. During
For the following table, assume a MARR of 10% per year and a useful life for each alternative of six years that equals the study period. The rank-order of alternatives from least capital investment
For the following table, assume a MARR of 15% per year and a useful life for each alternative is eight years which equals the study period. The rank-order of alternatives from least capital
After the base alternative has been identified, the first comparison to be made in an incremental analysis should be which of the following? (a) C → B (b) A → B (c) D → E (d) C → D (e) D → C
Using a MARR of 15%, the PW of the investment in A when compared incrementally to C is most nearly: (a) -$69,000 (b) -$21,000 (c) $20,000 (d) $61,000 (e) $53,000
Using a MARR of 15%, the preferred Alternative is: (a) Do nothing (b) Alt. A (c) Alt. B (d) Alt. C (e) Alt. D (f) Alt. E
Consider the mutually exclusive alternatives given in the table on p. 309. The MARR is 10% per year. Assuming repeatability, which alternative should the company select?(a) Alternative Z (b)
On her thirty-first birthday, Jean invests $1,000 into her employer's retirement plan, and she continues to make annual $1,000 payments for 10 years. So her total contribution (principal) is $10,000.
How are depreciation deductions different from other production or service expenses such as labor, material, and electricity?
An asset was purchased for $5,000. After the SL method was used to calculate depreciation for a total life of 25 years, the asset's expected salvage value is $500. What would the difference be
Your company has purchased a large new truck-tractor for over-the-road use (asset class 00.26). It has a cost basis of $180,000. With additional options costing $15,000, the cost basis for
A construction company is considering changing its depreciation from the MACRS method to the historical SL method for a general purpose hauling truck. The cost basis of the truck is $100,000, and the
A CNC milling machine has a cost basis of $40,000 and a depreciable life of 10 years. The estimated salvage value of the machine is zero at the end of the 10-year period. Use the DB method to
During its current tax year (year one), a pharmaceutical company purchased a mixing tank that had a fair market price of $120,000. It replaced an older, smaller mixing tank that had a BV of $15,000.
Firm ABC bought a piece of equipment 6 years ago, which firm XYZ has just purchased for $1,500,000. The equipment is expected to be operational for 20 more years. If its class life is 12 years, what
In June 2008, your company traded-in a used car with a BV of $5,000. The vendor, having accepted the older car as a trade-in, was willing to make a deal and offered to sell you a new car with an MV
A concrete and rock crusher for demolition work has been purchased for $60,000, and it has an estimated SV of $10,000 at the end of its five-year life. Engineers have estimated that the following
During a particular year, a corporation has $18.6 million in revenue, $2.4 million of operating expenses, and depreciation expenses of $6.4 million. What is the approximate federal tax this
Electrostatic precipitators costing $2,000 are used to separate ash particles from hot flue gases being discharged into the air. These precipitators must be replaced every 3,000 hours. If the plant
What conditions must a property satisfy to be considered depreciable?
A $125,000 tractor-trailer is being depreciated by the SL method over five years to a final BV of zero. Half-year convention does not apply to this asset. After three years, the rig is sold for (a)
A new machine costs $200,000 and is expected to reduce net annual operating costs by $40,000 per year for 10 years. It will have an MV of $40,000 at the end of the tenth year.a. Find ATCFs and BTCFs
Refer to Example 6-10. Work this problem on an after-tax basis when the MARR is 12% per year. The effective income tax rate is 40%, and MACRS depreciation is appropriate with a property class of five
A semiconductor manufacturer is considering the installation of an automatic control system. This is estimated to produce savings in the production process equivalent to $40,000 per year. The
An assembly operation at a software company currently requires $100,000 per year in labor costs. A robot can be purchased and installed to automate this operation, and the robot will cost $200,000
Liberty Airways is considering an investment of $800,000 in ticket purchasing kiosks at selected airports. The kiosks (hardware and software) have an expected life of four years. Extra ticket sales
Nordique Fab is an Arizona company dedicated to circuit board design and fabrication. It has just acquired new workstations and modeling software for its three "Valley of the Sun" design facilities,
Your company has just signed a three-year nonrenewable contract with the city of New Orleans for earthmoving work. You are investigating the purchase of heavy construction equipment for this job. The
Explain the difference between real and personal property.
The Greentree Lumber Company is attempting to evaluate the profitability of adding another cutting line to its present sawmill operations. They would need to purchase two more acres of land for
A drug store is looking into the possibility of installing a "24/7" automated prescription refill system to increase its projected revenues by $20,000 per year over the next five years. Annual
Your company is considering the introduction of a new product line. The initial investment required for this project is $500,000, and annual maintenance costs are anticipated to be $35,000. Annual
Your company has purchased equipment (for $50,000) that will reduce materials and labor costs by $14,000 each year for N years. After N years, there will be no further need for the machine, and
Refer to Problem 6-79. The alternatives all have a MACRS (GDS) property class of three years. If the effective income tax rate is 40% and the after-tax MARR = (1 - 0.4)(12%) = 7.2% per year, which
The following information is for a proposed project that will provide the capability to produce a specialized product estimated to have a short market (sales) life: • Capital investment is
In a chlorine-fluxing installation in a large aluminum company, engineers are considering the replacement of existing plastic pipe fittings with more expensive, but longer lived, copper fittings. The
An industrial coal-fired boiler for process steam is equipped with a 10-year-old electrostatic precipitator (ESP). Changes in coal quality have caused stack emissions to be in noncompliance with
Storage tanks to hold a highly corrosive chemical are currently made of material Z26. The capital investment in a tank is $30,000, and its useful life is eight years. Your company manufactures
Two fixtures are being considered for a particular job in a manufacturing firm. The pertinent data for their comparison are summarized in Table P7-39.The effective federal and state income tax rate
Explain how the cost basis of depreciable property is determined.
Individual industries will use energy as LJJUZ] efficiently as it is economical to do so, and there are several incentives to improve the efficiency of energy consumption. To illustrate, consider the
Two alternative machines will produce the same product, but one is capable of higher-quality work, which can be expected to return greater revenue. The following are relevant data:Determine which is
Two types of machine tools are available for performing a particular task in a manufacturing firm. The estimated cost and salvage values are given as follows:The effective income tax rate is 40%.
Alternative Methods I and 71 are proposed for a security operation. The following is comparative information:Determine which is the better alternative based on an after-tax annual cost analysis with
A firm is considering buying a new machine and has to choose between two options. The specifications of each are given below:For each machine, assume a three-year MACRS (GDS) recovery property and
A manufacturing process can be designed for varying degrees of automation. The following is relevant cost information:Determine which is best by after-tax analysis using an income tax rate of 40%, an
Allen International, Inc., manufactures chemicals. It needs to acquire a new piece of production equipment to work on production for a large order that Allen has received. The order is for a period
AMT, Inc., is considering the purchase of a digital camera for maintenance of design specifications by feeding digital pictures directly into an engineering workstation where computer-aided design
Refer to Example 7-15. Show that the PW of the annual EVA amounts by the new machinery is the same as the PW of the ATCF amounts ($17,208) given in Table 7-6.
Rework Example 7-21 using the MACRS depreciation method (assume three-year property class) instead of the SL depreciation method.
Why would a business elect, under MACRS, to use the ADS rather than the GDS?
You have the option to purchase or lease a five-axis horizontal machining center. Any revenues generated from the operation of the machine will be the same whether it is leased or purchased.
Determine the after-tax yield (i.e., IRR on the ATCF) obtained by an individual who purchases a $10,000, 10-year, 10% nominal interest rate bond. The following information is given: • Interest is
A 529-state-approved Individual Retirement Account (IRA) permits parents to invest tax-free dollars into their children's college education fund (this money may only be used for educational
A Roth IRA enables an individual to invest after-tax dollars during the accumulation phase of a retirement plan. The money is then income tax free when it is withdrawn during retirement. A
A bowling alley costs $500,000 and has a useful life of 10 years. Its estimated MV at the end of year 10 is $20,000. Create a spreadsheet that calculates the depreciation for years 1-10 using (i) the
Create a spreadsheet to solve Problem 7-24. What would the MV of Ml have to be (at the end of year five) for the firm to select Ml?
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