. (20 points) The Owls Engineering firm has been invited to participate in remod
ID: 2757395 • Letter: #
Question
. (20 points) The Owls Engineering firm has been invited to participate in remodeling Beurty Hall at Temple University and need to acquire a crane with a cost of $550,000. The cost of transporting the crane to Temple is $150,000. The project is expected to last seven years and at that time the cranes will be sold at an expected salvage value of $550,000(0.6)t. The crane has MACRS-GDS 7-year property class. The engineering firm will finance the crane with a loan to be paid with seven equal total payments plus interest every year at 6%. The engineering firm will receive for their services a payment of $200,000(1+0.05)tper year. Their O&M costs are expected to be $75,000 the first year increasing by 10% every year. Perform an ATCF analysis to determine if the project is economically feasible for the engineering firm. The firm MARR is 12% and tax rate is 40%.
The engineering firm is considering to keep the crane for future projects. The cost of the crane is the one described in problem 2 (including transportation costs). Its market value at the end of year one will be $300,000 decreasing by 15% every year to minimum of $100,000. The crane operating costs will be a gradient series of $25,000. The maintenance costs will be equal to 20% of the operating costs. MARR is 10%. Determine the optimum replacement interval.
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