[SOLVED] If the salvage value of an asset

> Gisele is performing a make/buy study involving the retention or disposal of a 4-year-old machine that was to be in production for 8 years. It cost $500,000 originally. Without a market value estimate, she decided to use the current book value plus 20% f

> Use the computations in Equations [16A.11] through [16A.13] to determine the MACRS annual depreciation for the following asset data: B = $50,000 and a recovery period of 7 years

> An 8-year recovery-period conveyor system for grading eggs is planned for DDB depreciation. The system had a first cost of $30,000 with a $9000 salvage value. The annual operating cost allocated to the conveyor is $7000 per year. The book value at the en

> A motorized cultivator with a first cost of $28,000 and salvage value of 25% of the first cost is depreciated by the DDB method over a 5-year period. If the operating cost is $43,000 per year, the depreciation charge for year 2 is closest to: (a) $18,000

> A commercial generator with an unadjusted basis of $50,000 is straight-line depreciated over a 5-year period. The asset will have an AOC of $35,000 and a salvage value of $10,000. The book value at the end of year 3 will be closest to: (a) $8000 (b) $20,

> Classic straight line depreciation of a $100,000 asset takes place over a 5-year recovery period. If the salvage value is 15% of first cost, the depreciation charge for year 3 is closest to: (a) $17,000 (b) $20,000 (c) $24,000 (d) $28,000

> All of the following assets can be depreciated, except: (a) A bulldozer (b) A copper mine (c) A surgical robot (d) A conveyor belt

> Benjamin used regression analysis to fit quadratic relations to monthly revenue, R, and total cost, TC, data with the following results, where Q is quantity. R = −0.008Q2 + 32Q TC = 0.005Q2 + 2.2Q + 10 (a) Plot R and TC. Estimate the quantities QBE and Q

> Determine the number of acceptable mutually exclusive bundles for the four independent projects described below if the investment limit is $400,000 and the following project selection restriction applies: Project 1 can be selected only if projects 3 and

> When there are a total of four projects involved in a capital budgeting study, the maximum number of bundles that can be formulated is: (a) 6 (b) 8 (c) 15 (d) 16

> Hempstead Industries has a new milling machine with B = $110,000, n = 10 years, and S = $10,000. Determine the depreciation schedule and present worth of depreciation at i = 12% per year, using the 175% DB method for the first 5 years and switching to th

> If B = $45,000, S = $3000, and n = 5-year recovery period, use a spreadsheet and i = 18% per year to maximize the present worth of depreciation, using the following methods: DDB-to-SL switching (this was determined in Problem 16A.6) and MACRS. Given that

> An asset has a first cost of $45,000, a recovery period of 5 years, and a $3000 salvage value. Use the switching procedure from DDB to SL depreciation, and calculate the present worth of depreciation at i = 18% per year.

> A new hybrid car was purchased by Pedernales Electric Cooperative as a courier vehicle to transport items between its 12 city offices. The car cost $35,000 and was retained for 5 years. Alternatively, it could have been retained for 100,000 miles. Salvag

> A robot used in simulated car crashes cost $70,000, has no salvage value, and has an expected capacity of tests not to exceed 10,000 according to the manufacturer. Volvo Motors decided to use the unit-of-production depreciation method because the number

> If B = $400,000, n = 6 years, and S is estimated at 15% of B for a new pavement recycling machine, use the SYD method to determine (a) the book value after 3 years, and (b) the rate of depreciation and the depreciation amount in year 4.

> Earthmoving equipment with a first cost of $150,000 is expected to have a life of 10 years. The salvage value is expected to be 10% of the first cost. Calculate (a) by hand, and (b) by spreadsheet the depreciation charge and book value for years 2 and 7

> From the five independent projects shown below, the one(s) to select with a capital limitation of $35,000 is/are: (a) P (b) PT (c) T (d) Q

> A European manufacturing company has new equipment with a first cost of 12,000 euros, an estimated salvage value of 2000 euros, and a recovery period of 8 years. Use the SYD method to tabulate annual depreciation and book value. Solve by hand and spreads

> Develop all (a) acceptable, and (b) nonacceptable mutually exclusive bundles for four independent projects if the investment limit is $350 and the following project selection restriction applies: Project 2 can be selected only if project 3 is selected. P

> Six projects have been identified for possible implementation by a company that makes dry ice blasters, machines that propel tiny dry ice pellets at supersonic speeds so they flash freeze and then lift grime, paint, rust, mold, asphalt, and other contami

> Develop all of the mutually exclusive bundles from independent projects identified as A, B, and C.

> If the cost of lime were to increase by 50%, would the cost difference between the best alternative and second- best alternative increase, decrease, or remain the same?

> Does a decrease in the efficiency of the aerator motor make the selected alternative of sludge recirculation only more attractive, less attractive, or the same as before?

> What will be the monthly savings in electricity from discontinuation of aeration if the cost of electricity is now 12 ¢∕kWh?

> Well-managed companies set aside money to pay for emergencies that inevitably arise in the course of doing business. A commercial solid-waste recycling and disposal company in Mexico City puts 0.5% of its after-tax income into such an account. (a) How mu

> How many mutually exclusive bundles can be formed from the following number of different independent projects: (a) 5; (b) 8; (c) 13? (d) By what amount is each total reduced if the DN project is not an option?

> State the difference between a contingent project and a dependent project.

> Listed below are bundles, each comprised of three independent proposals for which the PW has been estimated. For a capital investment limit of $45,000 and a MARR of 9% per year, the bundle selected is: (a) 1 (b) 2 (c) 3 (d) 4

> A video recording system was purchased 3 years ago at a cost of $30,000. A 5-year recovery period and MACRS depreciation have been used to write off the basis. The system is to be prematurely replaced with a trade-in value of $5000. Determine the MACRS d

> List at least three characteristics of a capital budgeting study.

> Quantum Electronic Services paid P = $40,000 for its networked computer system. Both tax and book depreciation accounts are maintained. The annual tax recovery rate is based on the previous yearâs book value (BV), while the book depreci

> Jobe Concrete Products placed a new sand sifter into production 3 years ago. It had an installed cost of $100,000, a life of 5 years, and an anticipated salvage of $20,000. Book depreciation charges for the 3 years are $40,000, $24,000, and $14,000, resp

> An energy production company has the following information regarding the acquisition of new gasturbine equipment. Purchase price = $780,000 Trans-oceanic shipping and delivery cost = $4300 Installation cost (1 technician at $1600 per day for 4 days) = $6

> Cyber Manufacturing purchased a complete video borescope system for applications that require work in places where eyes cannot see. The purchase price was $18,000, shipping and delivery was $300, installation cost was $1200, tax recovery period was 7 yea

> Ederly Quarry sells a wide variety of cut limestone for residential and commercial building construction. A recent quarry expansion cost $2.9 million and added an estimated 100,000 tons of reserves. (a) Estimate the cost depletion allowance for the next

> Carrolton Oil and Gas, an independent oil and gas producer, is approved to use a 20% of gross income depletion allowance. The write-off last year was $700,000 on its horizontal directional drill wells. Determine the estimated total reserves in barrels if

> There are three different life (recovery period) values associated with a depreciable asset. Identify each by name and explain how it is correctly used.

> SA Forest Resources purchased forest acreage for $500,000 from which an estimated 200 million board feet of lumber are recoverable. The company will sell the lumber for $0.10 per board foot. No lumber will be sold next year because an environmental impac

> A relatively small privately-owned coal-mining company has the sales results summarized below. Determine the annual percentage depletion for the coal mine. Assume the companyâs taxable income is $140,000 each year.

> The profitability index at 10% per year for a project that has an initial investment of $400,000, an AOC of $80,000 per year, revenue of $170,000 per year, and a salvage value of $60,000 after its 5-year life is closest to: (a) 0.95 (b) 1.06 (c) 1.38 (d)

> When WTA, Inc. purchased rights to extract silver from a mine for a total price of $2.1 million 3 years ago, the estimated 350,000 ounces of silver was to be removed over the next 10 years. A total of 175,000 ounces has been removed and sold thus far. (a

> What is the difference between depreciation and depletion?

> A plant manager for a fiber optics cable manufacturing company knows that the remaining capital investment in several types of equipment is more closely approximated when the equipment is depreciated linearly by the SL method compared to a rapid write-of

> (a) State the difference between book value and market value. (b) Describe a condition under which they will have significantly different values.

> An automated assembly robot that cost $400,000 has a depreciable life of 5 years with a $100,000 salvage value. The MACRS depreciation rates for years 1, 2, and 3 are 20.00%, 32.00%, and 19.20%, respectively. What is the book value at the end of year 3?

> For the MACRS method of depreciation, identify (a) the six standardized recovery periods for personal property, (b) the two recovery periods for real property, (c) the assumed salvage value for personal property, and (d) the default recovery period for a

> New equipment to read 96-bit product codes that are replacing old bar codes has just been purchased by General Food Stores. As a trial, 1000 of the items will be initially purchased. For book depreciation purposes (not tax), the total investment of $50,0

> A video recording system was purchased 3 years ago at a cost of $40,000. A 5-year recovery period and DDB depreciation have been used to write off the basis. The system is to be replaced this year with a trade-in value of $4000. What is the difference be

> If an asset is book-depreciated by the DDB method over a 5-year period, how long will it take to reach its salvage value if the estimated salvage is 25% of the first cost?

> In capital budgeting, when the present worth over the respective life of each project is used to select independent projects, all positive net cash flows are assumed to be: (a) Reinvested at the MARR through the end of the shortest-lived project (b) Rein

> Determine the first cost of a machine that is used for making spill-containment pallets if its book value in year 3 is $25,000. The machine has a 5-year life and the double declining balance method is applied.

> What is meant by an asset’s unadjusted basis? Adjusted basis?

> Software and hardware for optimizing cell design of robotic picking lines have an installed cost of $78,000 with no residual value after 5 years. For years 2 and 4, use DDB book depreciation to determine (a) the depreciation charge, and (b) the book valu

> A special-purpose digitizing system just acquired by Bzybee Consultants has B = $50,000 and a 4-year recovery period. (a) What is the accumulated depreciation after year 3 if the salvage value of the system is $5000? (b) What is the total amount of depre

> An asset owned by Photon Environmental was book-depreciated by the straight line method over a 5-year period with book values of $296,000 and $224,000 in years 2 and 3, respectively. Determine (a) the salvage value S used in the calculation, and (b) the

> Kobi Technologies book-depreciated an asset at $27,500 per year for 4 years using the straight line method. If the book value at the end of year 2 was $65,000, determine the asset’s (a) salvage value, and (b) first cost.

> A company that manufactures pulse doppler insertion flow meters uses the straight line method for book depreciation purposes. Newly-acquired equipment has a first cost of $170,000 with a 3-year life and $20,000 salvage value. Determine the depreciation c

> Goodson Healthcare purchased a new sonogram imaging unit for $300,000 and a truck body and chassis for an additional $100,000 to make the unit mobile. The unit-truck system will be depreciated as one asset. The functional life is 8 years, and the salvage

> What is the depreciation rate dt each year t for an asset that has a 5-year recovery period and is straight line depreciated?

> How does tax depreciation affect income taxes?

> A dependent project is one whose acceptance or rejection is based on: (a) Its rate of return with respect to the MARR (b) The amount of capital available for investment (c) A decision about another project (d) The amount receivable in salvage value of th

> The preliminary cost for a 50,000 ft2 aircraft hangar must be estimated. (a) The first unit estimate was $98.23 per square foot. Estimate the cost of the hangar. (b) The budget limit came in at $4 million. Perform two analyses: determine the maximum allo

> In the early and conceptual design stages of a project, what are the cost estimates called? Approximately how close should they be to the actual cost?

> Classify the following costs as typically direct (D) or indirect (I): Project staff……………………………….Audit and legal Utilities……………………………………..Rent Raw materials…………………………….Training on equipment Project supplies…………………………..Labor Administrative staff……………………..M

> Jet Green Airways historically distributes the indirect costs of lost and damaged baggage to its three major hubs using a basis of annual number of flights in and out of each hub. Last year, $667,500 was distributed as follows: The airlineâ&#

> Identify the output and input variables in both the bottom-up and top-down strategies to cost estimation.

> A company has a processing department with 10 stations. Because of the nature and use of three of these stations, each is considered a separate cost center for IDC allocation. The remaining seven are grouped as one cost center, CC190. Operating hours are

> The company you work for currently allocates insurance costs on the basis of cost per direct labor hour. This indirect cost component for the year is budgeted at $36,000. If the annual direct labor hours for departments A, B, and C are expected to be 200

> During a major expansion in 2004, Douwalla’s Import Company developed a new processing line for which the delivered equipment cost was $1.75 million. This year, the board of directors decided to expand into new markets and expects to build the current ve

> The six independent projects shown below are presented to you as an engineer with Peyton Packing. There are capital budget constraints because the company always has more projects to engage in than it has capital to fund them. Therefore, Peyton uses a re

> The delivered equipment cost for a fully equipped CNC machining system is $1.6 million. The direct cost factor is 1.52 and the indirect cost factor is 0.31. Estimate the total plant cost if the indirect cost factor applies to (a) the delivered equipment

> A chemical engineer at Western Refining estimated the total cost for a diesel fuel desulfurization system at $2.3 million. If the direct cost factor is 1.55 and the indirect cost factor is 0.43, what is the total equipment cost? Both factors apply to del

> The total cost for a production plant that supplies hydrogen to the refining industry is estimated at $55.4 million. The equipment is expected to cost $17.8 million. (a) What is the overall cost factor for this type of plant? (b) What is included in the

> The cost of equipment for manufacturing mineral products in a harsh environment is $2.3 million. If the overall cost factor for this type of facility is 2.25, what is the estimated total plant cost?

> State whether actual (A) or estimated (E) costs are more likely to be used to carry out the following activities: calculate taxes, make bids, pay bonuses, determine profit or loss, predict sales, set prices, evaluate proposals, distribute resources, plan

> A mini-wind tunnel for calibrating vane or hotwire anemometers costs $3750 in 2011 when the Marshall and Swift (M&S) equipment cost index value was 1490.2. If True-Tech Instruments estimated the cost of a wind tunnel twice as large to be $10,200 in 2016,

> Estimate the cost in 2018 of a 1000-horsepower steam turbine air compressor if a 200-horsepower unit costs $160,000 in 1999. The exponent in the cost capacity equation is 0.35 and the equipment cost index increased by 35% over that time period.

> The cost for construction of a desulfurization system for flue gas from boilers at a 600 MW power plant was estimated to be $250 million. If a similar system for a smaller plant had a cost of $55 million and the exponent in the cost-capacity equation is

> The estimated cost for a multi tube cyclone system with a capacity of 60,000 cubic feet per minute is $450,000. (a) If the $200,000 actual cost for a 35,000 cubic feet per minute system was used in the cost-capacity equation, what was the value of the ex

> The cost for implementing a manufacturing process that has a capacity of 6000 units per day was $550,000. If the cost for a plant with a capacity of 100,000 units per day was $3 million, what is the value of the exponent in the cost-capacity equation?

> If the capital budget limit is $120,000, the MARR is 10% per year, and all projects have a 10-year life, rank and select from the independent projects using the (a) PI measure, (b) IROR measure, and (c) PW at the MARR. (d) Are different projects selected

> What is the value of the exponent in the cost capacity equation if a pump half the size of a similar, but larger one, costs exactly half as much as the larger one?

> Estimate the cost of a 0.75 million gallon per day (MGD) induced-draft packed tower for air-stripping trihalomethanes from drinking water if the cost for a 2-MGD tower is $153,200. The exponent in the cost capacity equation is 0.58.

> When competition is the dominant factor in pricing a product or service, what is the best cost estimation strategy to adopt?

> What is the fundamental difference between estimating costs using a CER and a cost index?

> A quadrupole mass spectrometer can be purchased today for $85,000. The owner of a mineral analysis laboratory expects the cost to increase exactly by the specialty laboratory equipment cost index over the next 10 years. (a) If the specialty equipment inf

> A survey of total project construction costs for a wide range of buildings (hospitals, schools, banks, nursing homes, etc.) in 2006 found that the average cost was $13,136,431. The mechanical and electrical portions of that cost were $2,511,893 and $1,58

> An engineer who owns a construction company that specializes in large commercial projects noticed that material costs increased at a rate of 2% per quarter over the past 2 years. If a material cost index were created for that 2-year period with the value

> The Marshall and Swift (M&S) equipment cost index started with a base value of 100 in 1926. Determine the average (compound) percentage increase per year between 1926 and 2011 when the index value was 1490.2.

> A consulting engineering firm is preparing a preliminary cost estimate for a 40-MW advanced combined cycle natural gas-fired power plant. The firm, which completed a similar project in 2012 with a total cost (construction and equipment) of $809.2 million

> The cost of a piece of equipment was $67,900 when the relevant cost index was 1457.4. Determine the index value when the same equipment was estimated to cost $83,400?

> An estimated 6 billion gallons of clean drinking water disappear each day across the United States due to aging, leaky pipes, and water mains before it gets to the consumer or industrial user. The American Society of Civil Engineers (ASCE) has teamed wit

> Identify the following cost elements as first-cost (FC) components or annual operating cost (AOC) components for a piece of equipment in a chemical processing plant: rent, direct labor, equipment overhaul, overhead, supplies, insurance, equipment cost, u

> AB Jackson Industries installed a compressor and pump system in 2010 at a cost of $87,200. If the FRED equipment cost index applies, what will be the estimated cost now for a similar system when the index value is 273?

> The FRED CPI Index (Table 15â3) can be used to predict the price of household items over the years. In 2011, Sandy and Malcolm purchased a combo clothes washing machine and dryer for $800. Assume it is now 2018 and the combo system has

> Equipment necessary to manufacture adjustable ball-lock pins for pulling two components together had a cost of $185,000 when the FRED Equipment Cost Index was 210.0. What was the estimated cost of a similar system in 2015 when the index value was 245.9?

> Oil spill cleanup costs for a nation or region can be estimated by taking the average cost for the specified region and multiplying it by various “modification factors” that are a function of oil type (light crude, heavy crude, No. 4 fuel, etc.), spill s

Question: If the salvage value of an asset