Problem 17-14 (Static) The project manager of a task force planning the construction of a domed stadium had hoped to be able to complete prior to the start of the next college football season. After reviewing construction time estimates, it now appears that. of crashing will be needed to ensure project completion before the season opener. Given the following time and cos determine a minimum-cost crashing schedule that will shave five weeks off the project length. Note: No activity can b than two weeks. Activity Innediate Predecessor UDE Normal Time (veeks). 12 14 10 17 18 12 15 CRASHING COSTS First Week $15,000 10,000 5,000 20,000 16,000 12,000 24,000 Second Week $20,000 10,000 5,000 21,000 18,000 15,000 24,000
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- 8. Analysis of a replacement project Aa Aa At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Johnson Co. is considering replacing an existing piece of equipment. The project involves the following: The new equipment will have a cost of $1,800,000, and it will be depreciated on a straight-line basis over a period of six years (years 1-6). • The old machine is also being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. Replacing the old machine will require an investment in net working capital (NWC) of $60,000 that will be…8. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $600,000, and it will be depreciated on a straight-line basis over a period of six years (years 1-6). • The old machine is also being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. • Replacing the old machine will require an investment in net working capital (NWC) of $45,000 that will be recovered…c. The bridge project must that is estimated to require 2 years to complete is about to go underway. The bridge is projected to cost $48 million. It will need to begin construction in 18 months. Rights-of-way acquisition, surveying, and permitting have already been completed and paid for by the program. There will be 2 additional project phases: 1) planning & design, 2) construction. Each will require payment at the end of the phase. The projected cost of the 1st phase of the project is $5.5 million. The 1st phase is expected to need the entire 18 months prior to the start of construction and must be completed before construction can begin. The 2nd phase is projected to cost the remaining $42.5 million. Its construction is also expected to be completed at the end of the 2-year period following planning & design. There will need to be a payout of 30% of the cost of construction at the end of the 1st year of construction project. The remaining 70% will be paid at the completion…
- Current Attempt in Progress The management of Brawn Engineering is considering three alternatives to satisfy an OSHA requirement for safety gates in the machine shop. Each gate will completely satisfy the requirement, so no combinations need to be considered. The first costs, operating costs, and salvage values over a 5-year planning horizon are shown below. End of Year Gate 1 Gate 2 Gate 3 0 1 2 3 4 5 -$15,000 -$6,500 -$6,500 -$6,500 -$6,500 -$6,500+ $0 -$19,000 -$5,600 -$5,600 -$5,600 -$5,600 -$5,600+ $2,000 -$24,000 -$4,000 -$4,000 -$4,000 -$4,000 -$4,000+ $5,000Appendix Four (Equipment Replacement Decision)Objective: The proposed manufacturing plant has a food packaging equipment. The analysis would provide Jacob with decision support as to use that equipment or procure a new one. Scenario:The current equipment was purchased eight years ago for $ 750,000 and has eight useful years remaining. The new machine will cost $ 380,000 and will have the same useful life remaining as the old machine and will have zero disposal value. Currently the annual operating cost is $ 110,000 and will reduce by 50% if the new equipment is purchased. If the new equipment is procured, it will need to be shut down once a year for maintenance purposes. Opportunity cost of the shut down period is as follows:• $ 6,000 in each of the years 1-3• $ 8,000 in each of the years 4 and 5• $ 10,000 in each of the years 6 and 7The old equipment will have limited use and can only fetch $ 120,000 when disposed off at this time.Methodology:The group would calculate the net…6 A new subdivision is being built north of town. The existing road will no longer be sufficient to handle the increased traffic. Two alternatives are being considered. The first option is to expand and upgrade the existing road to a four-lane highway. The second option is to construct a new bridge across the river to provide additional access to the subdivision. The following data outlines the costs associated with each option. MARR = 12% The town uses a planning period of 30 years Initial Cost Annual Maintenance Travel Distance Highway $180,800,000 $710,000 20 km Bridge $400,100,000 $1,200,000 10 km The operating cost for the cars is expected to be about $1.00 per km The town expects approximately 351,000 trips per year What is the incremental annual benefit of the bridge? (HINT: the benefit is the saved time) Try Again What is the incremental annual cost of the bridge? Try Again Which project do you recommend?
- REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from 24,000 to 46,000 per year. The new machine will cost 80,000; and it will have an estimated life of 8 years and no salvage value. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The applicable corporate tax rate is 40%, and the firm's WACC is 10%. The old machine has been fully depreciated and has no salvage value. Should the old riveting machine be replaced by the new one? Explain your answer.Traffic congestion on Riverview Boulevard has reached a point where something must be done. Two suggested plans have a life of 15 years, because that is the scheduled time for completion of the new Skyway Highway. After that time traffic will fall well below current levels.Adding right-turn lanes at key intersections will cost $8.9M (million) with annual maintenance costs for signals and lane painting of $150,000. Added congestion during construction is a disbenefit of $900,000, but the reduced congestion after construction is an annual benefit of $1.6M. This benefit actually starts lower and increases over time, but for a simple initial analysis we are assuming a uniform annual benefit. Adding a second left-turn lane at a few key intersections will cost an additional $3M with an added annual maintenance cost of $75,000. This construction is more disruptive, and the total disbenefit for congestion during construction is $2.1M. Upon completion, the total benefit for reduced congestion…Engineering Econ: A toll bridge across the Ohio River is being considered as a replacement for the current John F. Kennedy I-65 bridge linking Indiana to Kentucky at Louisville. Because this bridge, if approved, would become a part of the United States interstate highway system, benefit-cost analysis must be applied in the evaluation. Initial investment costs of the structure are estimated to be $18,000,000, and $475,000 per year in operating and maintenance costs are anticipated over its 30-year projected lifetime. In addition, the bridge must be completely resurfaced every fifth year at a cost of $1,500,000 per occurrence; in other words, consider the first resurfacing to occur at t=5, the second at t=10, and so forth, but with no resurfacing cost in year 30 (because the bridge will be replaced at that time). Revenues generated from the tolls are anticipated to be $3,500,000 in its first year of operation (i.e., at t=1), with a projected annual rate of increase of 2% per year due to…
- #24 * Using NPW to Decide Between Competing Projects: Machine X has an initial cost of $12,000 and annual maintenance of $700 per year. It has a useful life of four years and no salvage value at the end of that time. Machine Y costs $22,000 initially and has no maintenance costs during the first year. Maintenance is $200 at the end of the second year and increases by $200 per year thereafter. Machine Y has a useful life of eight years and an anticipated salvage value of $5,000 at the end of its useful life. If the MARR is 6%, what is the approximate Net Present Worth (NPW) of machine Y? A. -$33,015 B. -$23,781 C. -$22,831 D. -$19,365(Related to Checkpoint 13.4) (Break-even analysis) The Marvel Mfg. Company is considering whether or not to construct a new robotic production facility. The cost of this new facility is $600,000 and it is expected to have a six-year life with annual depreciation expense of $100,000 and no salvage value. Annual sales from the new facility are expected to be 2,040 units with a price of $950 per unit. Variable production costs are $600 per unit, and fixed cash expenses are $85,000 per year. a. Find the accounting and the cash break-even units of production. b. Will the plant make a profit based on its current expected level of operations? c. Will the plant contribute cash flow to the firm at the expected level of operations? a. The accounting break-even units of production is 242.9 units. (Round to the nearest whole number.)(Related to Checkpoint 13.4) (Break-even analysis) The Marvel Mfg. Company is considering whether or not to construct a new robotic production facility. The cost of this new facility is $600,000 and it is expected to have a six-year life with annual depreciation expense of $100,000 and no salvage value. Annual sales from the new facility are expected to be 2,040 units with a price of $950 per unit. Variable production costs are $600 per unit, and fixed cash expenses are $85,000 per year. a. Find the accounting and the cash break-even units of production. b. Will the plant make a profit based on its current expected level of operations? c. Will the plant contribute cash flow to the firm at the expected level of operations? a. The accounting break-even units of production is 242.9 units. (Round to the nearest whole number.) GEILE