A cherry processing facility in Northern Michigan processes…
A cherry processing facility in Northern Michigan processes both sweet and tart cherries for local growers. The facility needs to install a new cherry pitter. An analyst recently obtained the following estimates. Preliminary feasibility study (this year, year 0) $6,000 Purchase & install system (this year, year 0) $260,000 Annual operating costs (years 1-8) $16,000 in year 1, increasing by $3,000 each year Salvage value (year 8) $26,000 Other phase-out activities (year 8) $4,500 The cherry pitter would be used for eight years. The facility uses a before-tax MARR of 8% per year for these types of decisions. (Round to nearest dollar.) What is the capital recovery (CR) cost of the system? $[cr] What is the annual equivalent worth of the operating costs? $[aoc] What is the annual equivalent cost of this project? $[aec]
Read DetailsA school must purchase new equipment for its chemistry lab….
A school must purchase new equipment for its chemistry lab. Two providers submitted the following estimates. The salvage values are not expected to change. The school evaluates laboratory equipment purchases over a 4-year study period using a present worth analysis. The annual effective interest rate is 8%. Provider A Provider B First cost, $ 19,000 20,900 Annual maintenance & operating costs, $ per year 3,400 1,700 Salvage value 1,900 2,090 Life, years 5 8 What is the present worth of the cash flow for Provider A that should be used in the analysis? $[npwa] (round to nearest dollar) The net present worth of the cash flows for Provider B is −$24,990. Based on a present worth analysis, which provider should the school select, A or B? [select]
Read DetailsIn order to expand tele-health services, a provider must inv…
In order to expand tele-health services, a provider must invest in technology for video and audio calls. The cost for the new equipment is $1,900,000. The equipment would be depreciated as a 5-year property using the MACRS method. Gross income from this investment is expected to be $750,000 in year 1 and increase by $30,000 each year. Annual operating expenses are expected to be $150,000 in year 1 and increase by $20,000 each year. The provider’s combined marginal tax rate is 39%. The provider uses a study period of 6 years for these purchases and plans to keep the equipment indefinitely. What is the cash flow after taxes for Year 4? $[ca2] (round to nearest dollar) Refer to the CFAT summary below. Use the CFAT that you calculated in (a) for Year 4. What is the after-tax Rate of Return over the study period? [ror]% (round percentage to one decimal) If their MARR is 14%, should the provider invest in this equipment, YES or NO? [in] Year CFAT,$ 0 −1,900,000 1 514,200 2 609,220 3 520,472 4 (a) CFAT 5 475,763 6 439,182
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