PROBLEM 9 A machine was bought for 100.000TL four years ago. Today, the owner carries out an economic analysis to decide whether he should sell the old machine and buy a new one. The old machine has a useful life of 10 years and its salvage value at the end of its useful life is 10.000TL. If the owner wants to sell it today, assume that its market value will be equal to its book value which can be calculated by considering its depreciated amount according to Straight Line Depreciation Method. The annual Operation and Maintenance Cost was 1.000TL/ year at the first year of its operation and increases by 500TL for the first 4 years and increases by 1.100TL in the remaining 6 years. The new machine can be purchased for 80.000TL now and it has a useful life of 7 years. The annual Operation and Maintenance Cost is 2.000TL/ year for the first 3 years and increases by 1.000TL in the remaining 4 years. It has a salvage value of 15.000TL at the end of its useful life. Use MARR=10%. a) Use the OUTSIDER VIEWPOINT to decide if the owner shall replace or keep the old machine now (USE PRESENT WORTH APPROACH). b) Find the economic life of the old machine (ASSUME THAT ITS MARKET/SALVAGE VALUE IS EQUAL TO ITS BOOK VALUE AT THE END OF EACH YEAR). Use the STRAIGHT LINE DEPRECIATION METHOD for depreciation calculations. 10.000TLPROBLEM 7 Given the cash flow of an equipment which has a first cost of 150 000 TL and a salvage value described by S= 120.000 - 20.000k, where k is the number of years since it was purchased. The salvage value does not go below zero. Determine its economic service life at an interest rate of 15% per year. Note that the equipment will have a maximum service life of 8 years.PROBLEM 12 An existing machine can be used for another 8 years if it is maintained every year. Operation and maintenance cost is estimated to be about 10.000 TL per year. On the other hand, a new machine, which can do the same service, can be purchased for 65.000 TL with a useful life of 10 years, and its operation and maintenance cost is estimated to be 14.000 TL per year. If the company expects to have 6% MARR from its investments, determine the minimum selling price of the existing machine so that purchasing the new machine will be more economical (No salvage value is to be considered for either machine). Use Comparative Use Value Method and Annual Equivalent values.PROBLEM 4 Ten years ago, the port of Fethiye built a new pier containing a large amount of steel work, at a cost of 3.000.000 TL, estimating that it would have a life of 50 years. The annual maintenance cost, much of it for painting and repair caused by the environment, has turned out to be unexpectedly high, averaging 70.000 TL/yr. The port manager has proposed to the port commission that this pier be replaced immediately with a reinforced concrete pier at an initial cost of 4.000.000 TL. He assumes them that this pier will have a life of at least 50 years with annual maintenance costs of not over 20.000 TL. He estimated that the net present salvage value of the existing pier would amount to 400.000 TL. Assuming a MARR of 10%, what should the port commission's decision be? Use the "Outsider Viewpoint" method and Annual Equivalent values
