IE343_HW12_Solutions

# Of capital expenses marginal cost euac 10000 4000

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Unformatted text preview: lue Cost of Capital Expenses Marginal Cost EUAC \$10,000 \$4,000 \$4,000 \$4,000 \$3,500 \$2,500 \$2,100 \$1,700 \$18,500 \$21,000 \$23,500 \$26,000 \$32,000 \$27,500 \$29,600 \$31,700 \$32,000 \$29,857 \$29,779 \$30,193 Defender EOY MV 0 1 2 3 4 \$35,000 \$25,000 \$21,000 \$17,000 \$13,000 The economic life of challenger is 2 years, and the corresponding EUAC is \$27,761. This is smaller than the marginal cost of keeping the Defender for one more year which is \$32,000. Therefore, the defender should be replaced immediately. Homework#12Solutions (10 points) P r ob l e m 5 T e x t b oo k p r ob l e m 9-15 We want to determine the best time to abandon the centrifuge Year Present Worth  1  2 3   4 5  PW (10%) reaches a maximum at 3 years. Therefore, the centrifuge should be retained for three years before abandonment. Homework#12Solutions (20 points) P r ob l e m 6 T e x t b oo k p r ob l e m 9-16 EOY 0 MV L oss in MV C os t of C apit al =B2B3 =B3B4 =B4B5 =B5B6 =B6B7 =B7B8 =B8B9 =B9B10 =B2* 0.07 =B3* 0.07 =B4* 0.07 =B5* 0.07 =B6* 0.07 =B7* 0.07 =B8* 0.07 =B9* 0.07 A p p r ox. A f te r - T a x T ota l ( M a r gi na l) c os t M A C RS B V I n t e r est o n T a x C r edit A d j ust e d A f t e r -t a x T ota l( M a r g i n a l ) C os t 8000 A nn . E xp. 0...
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