INSTRUCTOR PROBLEMS
Problem 7.57
Write a general computer program to solve the following project costing problem. Test the program using the
numbers provided. The program should accept the initial cost of equipment ( C ), an annual maintenance cost ( M ), an
annual income ( R ), a salvage value ( S ), and an interest rate ( I ). The program should then calculate a present worth
and the ROI.
C = 100,000
M = 20,000
R = 150,000
S = 10,000
I = 10%
L = 3 yrs
Test values:
Problem 7.58
Write a program that determines the ROI for a project given the project length, initial cost, salvage value, and
estimated income. To test the program, assume that the project lasts for 36 months. The company standard interest
rate is 18%. The equipment will cost $100,000 new and have a salvage value of $10,000. The annual income will be
$50,000.
Problem 7.59
Consider the costs for the current, and a proposed, manufacturing work center. Use a breakeven analysis to
determine the payback period.
Current Manual Line:
• Used 2000 hrs/yr with 10 workers at $20/hr each.
• Maintenance is $20,000/yr.
• The current equipment is worth $20,000 used.
Proposed Line:
• The equipment will cost $100,000 and the expected salvage value at
the end of the project is $10,000.
• 2 workers are required for 1000 hours year at $40/hr each.
• Yearly maintenance will be $40,000.
Problem 7.60
Consider an assembly line that is currently in use, and the system proposed to replace it. The product line is
expected to last 5 years and will then be sold off. The corporate tax rate is 50% and the company policy is to require a
17% rate of return. Should we keep the old line or install the new one?
C
current
20000 10 20( )2000 20000+( )t– 420000t– 20000+= =
C
proposed
10000 100000–( ) 2 40( )2000 40000+( )t– 200000t– 90000–= =
420000t– 20000+ 200000t– 90000–=
t110000–220000–
––––––––––––––––––––– 0.5= =