Engineering Economics, Please just type A B C D, transactions are not important

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Engineering Economics, Please just type A B C D, transactions are not important just true choice

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An injection molding machine can be purchased and installed for $90,000. It is expected to be kept in service for eight years It is believed that $10,000 can be obtained when the machine is disposed of the at the end of year eight. The net annual value added that can be attributed to this machine is constant over eight years and amounts to $15,000. An effective income tax-rate of 40% is used by the company, and the before-tax MARR equals 25% per year. Use 150% Declining Balance depreciation method Answer the following questions based on above given information M What are the depreciation amounts in year one and year eight? 3 What are the BTCF, TI, T and ATCF of year 8? A. $10,561 and $3,016 A. $10,000, $10,000, $4,000, and $6,000 B. $11,861 and $4,061 B. $25,000, $3,962, $1585, and $23,415 C. $16,875 and $3,945 C. $23,000, $21,986, $7,394, and $1,606 D. $15,861 and $5,068 D. $25,000, $20,986, $8,394, and $16,606 What are the ATCFs for this machine at the end of years 1 and 6? A. $12,144 and $12,211 B. $10,144 and $2,211 C. $11,122 and $11,211 D. $15,750 and $11,390 4 Your company is consideringthe introduction of a new product line. The initial investment required for this project is $500,000, and annual maintenance costs are anticipated to be $35,000. Annual operating cost will be directly in proportion to the level of production at $7.50 per unit, and each unit of product can be sold for $50.00. If the project has a life of five years what is the minimum annual production level for which this project is economicallyviable? Work this problem on an after tax basis Assume five-year SL depreciation (SV5 0), and effective income tax rate of 40%, and an after-tax MARR of 10% per year A. 5400$ B. 4428$ C. 4430$ D. 5000$ XYZ rapid prototypina (RP) software costs $20,000, lasts one vear and will be expensed (i.e., written off in one year The cost of the upgrades wi ncrease 10 per year, starting at the beginning of year two. How much can be spent now for an RP software upgrade agreement that lasts three years and must be depreciated with SL method to zero over three years MARR is 20 per year (im) and the effective income tax rate (t) is 34% A. 40$ B. 50 C., 45$ D. 55 Your salary was projected to increase atthe rate of 4% per year, and the general price nflation rate was expected to be 6 per year. Your resulting estimated salary fort he four years in actual and real dollars was as follows End of Year, k Salary (A$ Salary(R$) 45,000 45,000 46,800 44,151 48,672 43,318 50,619 42,500 What is the present worth (PMA) of the four-year actual dollar salarycash flows at the end of year one (base year) if your personal MARRm is 10% per year A. 200,000 B. 165,798 C. 170,000 D. 166.000 What is the present worth (PW) of the four-year real- dollar salary cash flows at the end of year one (base year) if your personal MARRm is 10% per year A. 164,789 B. 150,178 C. 165,789 D. 170.789

Explanation / Answer

Part 1)

We will have to calculate the annual depreciation rate with the use of 150% declining balance method. To calculate the rate we use the following formula :

Annual Depreciation Rate = 1.5/8 (Double Declining Rate/Years) = 18.75%

Annual Depreciation = Book Value of the Machine at Year End*Depreciation Rate

____________

Complete Depreciation Schedule:

Depreciation is calculated on the book value at the end of each year. Book value is the difference between the cost of machine and accumulated depreciation upto the relevant year. For Instance, for first year depreciation would be on the cost of 90,000 at the rate of 18.75% = $16,875. For second year the depreciation will be calculated on the book value at the end of first year (90,000 - 16,875 = 73,125) at the rate of 18.75% = $13,711 and so on.

Answer is $16,875 and $3,945 (which is Option C)

__________________

Part 2)

Year Book Value Annual Depreciation 1 90,000 16,875 2 73,125 13,711 3 59,414 11,140 4 48,274 9,051 5 39,223 7,354 6 31,868 5,975 7 25,893 4,855 8 21,038 3,945

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