Problem 13-9 - In this problem you are to determine when the existing drill press (the defender) purchased two years ago for
$40,000 should be replaced by the new drill press (the challenger) having the uniform annual cost (UAC) of $7000. The yearly cost data for the defender are available in the problem and tabulated in the table in part (a). Solve this problem by completing the marginal cost table and answer questions below.
a) Complete the marginal cost table of the defender below (ref. Example 13-3 and 13-4)
|
YEAR
|
MARKET VALUE (MV)
|
MARGINAL COSTS FOR YEAR n
|
If equip. is kept to year n
|
|
LOST IN MV
|
INTEREST ON MV
|
O & M COSTS
|
TOTAL MARGINAL COSTS
|
PWC
Marginal Costs
|
EUAC
Marginal Costs
|
|
0 (Now)
|
$15,000
|
|
|
|
|
|
|
|
1
|
$12,000
|
$3,000
|
$1,500
|
$2,700
|
$7,200
|
$6,545
|
$7,200
|
|
2
|
$10,000
|
$2,000
|
|
$2,900
|
|
|
|
|
3
|
$8,000
|
$2,000
|
|
$3,300
|
|
|
|
|
4
|
$6,000
|
$2,000
|
|
$3,700
|
|
|
|
|
5
|
$4,000
|
$2,000
|
|
$4,200
|
|
|
|
|
6
|
$2,000
|
$2,000
|
|
$4,700
|
|
|
|
b) Is the total marginal cost increasing or decreasing?
c) What replacement analysis technique can be used in this case?
d) When should the drill press be replaced with the new drill press having EUAC of $7000?
Problem 13-10 - Complete the table below to confirm $17,240 is the minimum UAC if the machine is kept to year 4.
|
YEAR
|
CASH FLOW
|
If equip is kept to year n
|
|
n
|
Equip. Cost
|
SV = MARKET VALUE
|
Maintenance
|
PW to year n
|
EUAC To
year n
|
|
0
|
-$50,000
|
|
|
|
|
|
1
|
|
$40,000
|
-$3,500
|
|
|
|
2
|
|
$32,000
|
-$5,500
|
|
|
|
3
|
|
$25,600
|
-$7,500
|
|
|
|
4
|
|
$20,480
|
-$9,500
|
|
-$17,240
|
|
5
|
|
$16,384
|
-$11,500
|
|
|
|
6
|
|
$13,107
|
-$13,500
|
|
|
Problem 13-23 - Complete the table below and determine the economic life of the pipe: years.
|
YEAR
|
MARKET VALUE (MV)
|
MARGINAL COST FOR YEAR n
|
If equip. is kept to year n
|
|
LOST IN MV
|
INTEREST ON MV
|
O & M COSTS
|
TOTAL MARGINAL COSTS
|
PWC
Marginal Costs
|
EUAC
Marginal Costs
|
|
0
|
$25
|
$0
|
|
|
|
|
|
|
1
|
$0
|
-$25
|
-$4
|
-$8.50
|
-$37.25
|
-$32.39
|
-$37.25
|
|
2
|
$0
|
$0
|
$0
|
-$14.50
|
|
|
|
|
3
|
$0
|
$0
|
$0
|
-$20.50
|
|
|
|
|
4
|
$0
|
$0
|
$0
|
-$26.50
|
|
|
|
|
5
|
$0
|
$0
|
$0
|
-$32.50
|
|
|
|
Problem 13-50 - Complete the tables below to determine the after-tax costs of keeping the old folklift and the new folklift. Should the company kept the old folklift for the present or replace it now with the new one?
KEEP OLD FOLKLIFT
|
YEAR
|
BTCF
|
SL
Depr.
|
TI
|
Income Tax @ 40%
|
ATCF
|
EUAC if kept to year n
|
|
0
|
$0
|
|
|
|
|
|
|
1
|
-$400
|
$0
|
|
|
|
|
|
2
|
-$600
|
$0
|
|
|
|
|
|
3
|
-$800
|
$0
|
|
|
|
|
|
4
|
-$1,000
|
$0
|
|
|
|
|
|
5
|
-$1,400
|
$0
|
|
|
|
|
|
6
|
-$1,400
|
$0
|
-$1,400
|
$560
|
-$840
|
-$531
|
|
7
|
-$1,400
|
$0
|
-$1,400
|
$560
|
-$840
|
-$565
|
|
8
|
-$1,400
|
$0
|
-$1,400
|
$560
|
-$840
|
-$591
|
|
9
|
-$1,400
|
$0
|
-$1,400
|
$560
|
-$840
|
-$611
|
|
10
|
-$1,400
|
$0
|
-$1,400
|
$560
|
-$840
|
-$627
|
BUY NEW FORKLIFT
|
YEAR
|
BTCF
|
SL
Depr.
|
TI
|
Income Tax @ 40%
|
ATCF
|
EUAC if kept to year n
|
|
0
|
-$6,500
|
|
|
|
-$6,500
|
|
|
1
|
-$50
|
$650
|
-$700
|
$280
|
$230
|
-$6,790
|
|
2
|
-$50
|
$650
|
-$700
|
$280
|
$230
|
-$3,415
|
|
3
|
-$50
|
$650
|
-$700
|
$280
|
$230
|
-$2,292
|
|
4
|
-$50
|
$650
|
-$700
|
$280
|
$230
|
-$1,732
|
|
5
|
-$50
|
$650
|
|
|
|
|
|
6
|
-$50
|
$650
|
|
|
|
|
|
7
|
-$50
|
$650
|
|
|
|
|
|
8
|
-$50
|
$650
|
|
|
|
|
|
9
|
-$50
|
$650
|
|
|
|
|
|
10
|
-$50
|
$650
|
|
|
|
|
Problem 14-23
1) In the table below, calculate yearly inflation rate and the average inflation rate for the last 5 years.
|
Years ago
|
Average Home Price
|
Inflation Rate
|
|
5
|
$265,000
|
|
|
4
|
$267,000
|
|
|
3
|
$272,000
|
|
|
2
|
$280,000
|
|
|
1
|
$283,000
|
|
|
0
|
$288,000
|
|
|
|
Average =
|
|
2) What is your estimate of the inflation rate for next year?