FREE Trial

A piece of equipment has a first cost of $150,000, a maximum useful life of 7 years, and a market

Question:

A piece of equipment has a first cost of $150,000, a maximum useful life of 7 years, and a market (salvage) value described by the relation S = 120,000 – 20,000 k , where k is the number of years since it was purchased. The salvage value cannot go below zero. The AOC series is estimated using AOC = 60,000 + 10,000 k. The interest rate is 15% per year. Determine the economic service life

(a) By hand solution, using regular AW computations,

(b) By spreadsheet, using annual marginal cost estimates.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...

This problem has been solved!


Do you need an answer to a question different from the above? Ask your question!

Step by Step Answer:

Answer rating: 62% (8 reviews)

a Solution by hand using regular AW computations AW …View the full answer


answer-question
Answered By
tutor-profile-image
Zablon Gicharu
I am an educator who possesses the requisite skills and knowledge due to interacting with students for an extended period. I provide solutions to various problems in step-by-step explanations, a well-thought approach and an understandable breakdown. My goal is to impart more straightforward methodologies and understanding to students for more remarkable achievements.
5.00+ 4+ Reviews 10+ Question Solved
Related Book For  answer-question
Engineering economy

Engineering economy

ISBN: 978-0073376301

7th Edition

Authors: Leland Blank, Anthony Tarquin

See More Books
View Solution
Create a free account to access the answer
Cannot find your solution?
Post a FREE question now and get an answer within minutes. * Average response time.
Question Posted: December 17, 2012 06:06:37
See More Questions

Students also viewed these Economics questions

Q:
A fund manager holds a diversified portfolio of Australian shares with a market value of $35 million and a beta of 1.3. The manager would like to decrease the portfolio beta to 0.8 for a three month...
A:
The given question can be solved by first calculating Portfolio value and value of single......
Q:
A construction company can purchase a piece of equipment for $50,000 and spend $100 per day in operating costs. The equipment will have a 5-year life with no salvage value . Alternatively, the...
A:
Let s say the company uses equipment for x days Theref......
Q:
The company sells large industrial equipment. A piece of equipment with an original cost of $250,000 and an original selling price of $390,000 was recently returned. It is expected that the equipment...
A:
1 Loss on return 250 000 recorded amount of returned inventory 250 000 original cost 0 loss S......
Q:
The National Health Statistics Reports dated Oct. 22, 2008, included the following information on the heights (in.) for non-Hispanic white females: a. Calculate and interpret a confidence interval at...
A:
a With large sample sizes a 95 confidence interval for the difference of population means 1 2 is Usi......
Q:
For which point groups can a molecule be optically active?
A:
To conclude we can say that for optical act......
Q:
Find the local maximum and minimum values and saddle point(s) of the function. If you have three-dimensional graphing software, graph the function with a domain and viewpoint that reveal all the...
A:
Click to View...
Q:
Describe the circumstances leading to including CVA in the Basel III Accord and how the CVA requirement might be expected to alleviate future problems.
A:
The financial crisis of 20072008 revealed a substa......
Q:
Trans Sport Company sells sporting goods to retailers in three different statesFlorida, Georgia, and Tennessee. The following profit analysis by state was prepared by the company: In addition, assume...
A:
1 TRANS SPORT COMPANY Contribution Margin by State Florida Georgia Tennessee Revenue 1 125 000 1 000......
Q:
The journal entry to record depreciation expense includes: 1) A debit to the residual value. 2) A credit to depreciation expense. 3) A debit to accumulated depreciation. 4) A credit to...
A:
The detailed answer for the above question is provided below I The correct entries for......
Q:
Virginia Day owns a 5 percent limited partnership interest in Zulu Limited Partners. In Year 4 the partnership incurred a substantial loss. On January 1, Year 5, Virginia sold the partnership...
A:
Step 1 1 Year 4 loss suspended due to tax basis limitation Ans A loss suspended due to tax basis is a capital loss that cannot be offset due to passiv......
Q:
A large, standby electricity generator in a hospital operating room has a first cost of $70,000 and may be used for a maximum of 6 years. Its salvage value , which decreases by 15% per year, is...
A:
AW 1 70 000 A P 12 1 75 000 59 500 A F 12 1 93 900 AW 2 70 000 A P 1......
Q:
Determine the economic service life and corresponding AW value for a machine that has the following cash flow estimates. Use an interest rate of 14% per year and handsolution. Salvage Value, $...
A:
Set up AW equations for n 1 through 7 and solve by hand AW 1......
Q:
Assume you are redesigning a hardware prefetcher for the unblocked matrix transposition code as in Exercise 5.7. However, in this case we evaluate a simple two-stream sequential prefetcher. If there...
A:
a A sequential stream buffer would not help with fetching the column entries f......
Q:
2) Consider the surface 3r + 3y-2 = 3. Change the equation to cylindrical coordinates (0, r, z) and draw the surface in MATLAB for 0 0 <2m, -3 < <3. Attach the MATLAB code and picture.
A:
Click to View...
Q:
Janelle had eaten a whole medium pizza and a half gallon of ice cream, and then she made herself vomit. She most likely has an eating disorder called bulimia nervosa anorexia nervosa gastronomia...
A:
The detailed answer for the above question is provided below Based on th......
Q:
Mr. Jennings has a job earning $100,000 per year. His only debt is an outstanding mortgage of $200,000 on his home. He is married and they have 4 children. He estimates that if he were to die, his...
A:
To calculate the amount of insurance Mr Jennings should purchase using the family need metho......
Q:
Lee, Inc. provides wilderness adventure guided tours. The 2017 and 2018 net assets for the company are shown below. What is the dollar amount of net assets generated through their operations of...
A:
SOLUTION 1 Net assets generated through operations in 2017 Retained Earnings in 2017 35......
Q:
You have been assigned as the project manager for a software development project for a large financial institution. The project involves developing a new online banking system. As part of your...
A:
In the context of a software development project like creating a new online banking system for a financial institution the Procurement Management Plan......
Q:
Let (x) = x 2 - 9, g(x) = 2x, and h(x) = x - 3. Find each of the following. (fh) (-1)
A:
To find fh 1 we need to compute the composition of functions f and......
Q:
Use the T account for Cash below to record the portion of each of the following transactions, if any that affect cash. How do these transactions affect the companys liquidity? Jan. 2 Provided...
A:
The transactions of Jan 2 and 4 have an......
Q:
Two alternatives, identified as X and Y, are evaluated using the B/C method. Alternative Y has a higher total cost than X. If the B/C ratios are 1.2 and 1.0 for alternatives X and Y, respectively,...
A:
Alternative X should be sel......
Q:
One of two alternatives will be selected to reduce flood damage in a rural community in central Arizona. The estimates associated with each alternative are available. Use B/C analysis at a discount...
A:
PW of cost of Retention 880 000 92 000 P A 8 20 880 000 92 000 9 8181 1 783 265 PW......
Q:
The city engineer and economic development directors are evaluating two sites for construction of a multipurpose sports arena. The sites are downtown (DT) and southwest (SW) of the metropolitan area....
A:
DT will have the larger equivalent total......
Introduction To Statistical Modelling And Inference 1st Edition - ISBN: 1032105712 - Free Book