# Question 9.4: Economic Life of a Challenger (New Asset) A new forklift tru...

Economic Life of a Challenger (New Asset)

A new forklift truck will require an investment of $30,000 and is expected to have year-end MVs and annual expenses as shown in columns 2 and 5, respectively, of Table 9-2. If the before-tax MARR is 10% per year, how long should the asset be retained in service? Solve by hand and by spreadsheet. TABLE 9-2 Determination of the Economic Life, N$^{\ast }$, of a New Asset (Example 9-4)  (1) End of Year, k (2) MV, End of Year k (3) Loss in Market Value (MV) during Year k (4) Cost of Capital = 10% of Beginning of Year MV (5) Annual Expenses (E$_{k}$) (6) [= (3) + (4) + (5)] Total (Marginal) Cost for Year (TC$_{k}$) (7) EUAC$^{a}$ through Year k 0$30,000 1 22,500 $7,500$3,000 $3,000$13,500 $13,500 2 16,875 5,625 2,250 4,500 12,375 12,964 3 12,750 4,125 1,688 7,000 12,813 12,918 N$^{\ast}_{c}$= 3 4 9,750 3,000 1,275 10,000 14,275 13,211 5 7,125 2,625 975 13,000 16,600 13,766 $^{\ast}$$EUAC_k =\left[\sum_{j=1}^{k} TC_j(P/F,10\%,j)\right] (A/P,10\%,k)$ The "Step-by-Step Explanation" refers to a detailed and sequential breakdown of the solution or reasoning behind the answer. This comprehensive explanation walks through each step of the answer, offering you clarity and understanding. Our explanations are based on the best information we have, but they may not always be right or fit every situation. The blue check mark means that this solution has been answered and checked by an expert. This guarantees that the final answer is accurate. Learn more on how we answer questions. Already have an account? ## Related Answered Questions Question: 9.10 ## CASE STUDY−−Replacement of a Hospital’s Emergency Electrical Supply System Sometimes in engineering practice a replacement analysis involves an existing asset that cannot meet future service requirements without augmentation of its capabilities. When this is the case, the defender with increased ... ## Verified Answer: The after-tax analysis of the first alternative (d... Question: 9.12 ## After-Tax EUAC Analysis (Restatement of Example 9-3 with Tax Information) The manager of a carpet manufacturing plant became concerned about the operation of a critical pumpin one of the processes. After discussing this situation with the supervisor of plant engineering, they decided that a ... ## Verified Answer: The after-tax computations for keeping the defende... Question: 9.3 ## Before-Tax Replacement Analysis Using EUAC The manager of a carpet manufacturing plant became concerned about the operation of a critical pumpin one of the processes. After discussing this situation with the supervisor of plant engineering, they decided that a replacement study should be done, and ... ## Verified Answer: In an analysis of the defender and challenger, car... Question: 9.7 ## Replacement Analysis Using the Coterminated Assumption Suppose that we are faced with the same replacement problem as in Example 9-6, except that the period of needed service is (a) three years or (b) four years. That is, a finite analysis period under the coterminated assumption is being used. ... ## Verified Answer: (a) For a planning horizon of three years, we migh... Question: 9.6 ## Economic Life of a Defender (Existing Asset) It is desired to determine how much longer a forklift truck should remain in service before it is replaced by the new truck (challenger) for which data were given in Example 9-4 and Table 9-2. The defender in this case is two years old, ... ## Verified Answer: Table 9-3 shows the calculation of total cost for ... Question: 9.5 ## Economic Life of a Laptop Computer Determine the economic life of an$800 laptop computer. Your personal interest rate is 10% per year. Annual expenses and year-end resale values are expected to be the following: ...

The marginal cost of keeping the computer for each...
Question: 9.8

## When to Retire an Asset (No Replacement) An $80,000 baling machine for recycled paper was purchased by the XYZ company two years ago. The current MV of the machine is$50,000, and it can be kept in service for seven more years. MARR is 12% per year and the projected net annual receipts (revenues ...

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Question: 9.10

Given that MV$_{0}$ = $12,000, BV[lat... Question: 9.11 ## After-Tax Investment Cost of a Defender: BV < MV An engineering consulting firm is considering the replacement of its CAD workstation. The workstation was purchased four years ago for$20,000.Depreciation deductions have followed the MACRS (GDS) five-year property class schedule. The workstation ...
The calculations using Equation (9-4 : TC_{...