In a replacement study, the correct value for the first cost of the challenger is: OA. the cost minus the trade-in value of the defender. OB. the book value of the defender. OC. the cost when it was purchased. OD. the first cost plus the trade-in value of the defender. The economic service life of an asset is: OA. the time when the salvage value goes below 25% of the first cost. OB. the time when the operating cost is at a minimum. OC. the length of time required to cover the first cost of the asset. OD. the time when the annual worth of the asset is at a minimum. A milling machine with enhanced CNC controls that allow for high-speed machining of free-form parts was purchased two years ago for $186,000. The company wants to purchase a recently available faster model with 8-axis control for $240,000. The presently owned machine can be sold today for $122,000. Its operatin costs over the past two years have been $33,000 per year. The value that should be used as P for the presently owned machine is: OA. $186,000 OB. $240,000 OC. $33,000 OD. $122,000 Five mutually exclusive alternatives are being considered for providing a sewage-treatment facility. The annual equivalent costs and estimated benefits of the alternatives are given in the table below. Which plan, if any, should be adopted if the Sewage Authority wishes to invest if, and only if, the B-C ratio is at least 1.0? Annual Equivalent (in thousands) Alternative Cost Benefits A B C MOOO >> $920 $630 1,050 1,280 1,450 1,370 D 970 990 E 1,240 1,600 Perform the incremental B-C Analysis. Fill-in the table below. (Round to four decimal places.) Alternative Inc. B-C ratio Is the alternative acceptable? Alternative should be chosen. Zapponi's Pizza Parlor currently mixes and shapes all its pizza dough by hand. The variable cost for this process is $3.82 per pizza and the fixed costs are $31,000 per year. The company can invest in automated equipment that would have a fixed cost of $45,000 per year but reduce the variable cost to $2.18 per pizza. a. What is the break-even point for the hand process if the pizzas sell for $8.41 each? pizzas (round to nearest whole number) b. What is the break-even point between the hand and the automated process? (round to nearest whole number) A firm is considering an investment project and uses a MARR of 10%. The following optimistic, most likely, and pessimistic estimates have been provided. Optimistic Most Likely Pessim Investment $67,500 $90,000 $112,500 Net Annual Receipts $35,000 $28,000 Salvage Value $6,750 $9,000 Life 15 years 10 years $21,000 $11,250 8 years The Annual Worth of the Optimistic values is: $ The Annual Worth of the Most Likely values is $ The Annual Worth of the Pessimistic values is: $ Is your decision sensitive to changes in the Net Annual Receipts? (Must show work in your submitted work to support your answer) O Yes O No Mary Meek, the owner of a flower shop is considering purchasing a new van for deliveries. She has estimated that the new van would result in savings of $38,000 per year over the old van. The new van would cost $50,000 and will have a useful life of six years (MACRS GDS 5-year recovery period) at which time it can be sold for $5,000. Mary uses a 15% after-tax MARR and the van would be depreciated using MACRS. Mary's effective tax rate is 40%. Round all values to the nearest dollar. a. Determine the depreciation schedule for straight line and 150% declining balance. Year Straight Line $ 150% Declining Balance 2 $ 3 4 $ 5 6 $ $ $ $ $ _ b. Using the MACRS depreciation determine if the van should be purchased on an after-tax basis. Year 0 BTCE dep TI $ Tax $ 1 $1 $ $ 2 $ $ $ $ 3 $ $ $ $ 4 $ $ $ 5 $ $ $ $1 $ 6 $ $ $ $ The Present Worth of the ATCF is: $ Should the van be purchased based on the after-tax analysis? O Yes O No