Reference no: EM131009117

Draw the diagram clash-flow

1. Humana Hospital Corporation installed a new MRI machine at a cost of $750,000 this year in its medical professional clinic in Cedar Park. This state-of-the-art system is expected to be used for 5 years and then sold for 875.000. Humana uses a return requirement of 24% per year for all of its medical diagnostic equipment. As a bioengineering student currently serving a coop semester on the management staff of Humana Corporation in Louisville, Kentucky, you are asked to determine the minimum revenue required each year to realize the expected recovery and return. Also, you are asked to draw two cash flow diagrams, one showing the MRI purchase and sale cash flow and a second depicting the required capital recovery each year.

2. The Closing the Caps initiative by the Texas Higher Education Coordinating Board established the goal of increasing the number or students In higher education in Texas from 1.064.247 in 2000 to 1.694247 in 2015. If the Increase were to occur uniformly, what rate of Increase would be required each year to meet the goa.

3. If a fan buys a sports mortgage to USC football games by paying $130,000 in 10 equal payments starting now, and then pays a fixed price of $290 per year for 50 years (starting 1 year from now) for season tickets, what is the AW in years 1 through 50 of the season tickets at 8% per year interest?

4. Ten years ago, Jacobson Recovery purchased a wrecker for $285,000 to move disabled 18-wheelers. He anticipated a salvage value of $50,000 after 10 years. During this time hils average annual revenue totaled $52,000.

(a) Did he recover his investment and a 12% per year return?

(b) If the annual M&O cost was $10,000 the first year and increased by a constant $1000 per year, was the AW positive or negative at 12% per year? Assume the $50,000 salvage was realized.

5. PGM Consulting is under contract to Montgomery County for evaluating alternatives that use a robotic, liquid-propelled "pig" to periodically in¬spect the interior of buried potable water pipes for leakage, corrosion, weld strength, movement over time, and a variety of other parameters. Two equivalent robot instruments are available. Robot Joeboy will have a first cost of $85,000, annual M&O costs of $30,000, and a $40,000 salvage value after 3 years. Robot Watcheye will have a first cost of $125,000, annual M&O costs of $27,000, and a $33,000 salvage value after its 5-year life. Assume an interest rate of 8% per year.

(a) Which robot is the better economic option?

(b) Using the spreadsheet Goal Seek tool, determine the first cost of the robot not selected in (a) so that it will be the economic option?

6. You work for Midstates Solar Power. A manager asked you to determine which of the following two machines will have the lower (a) capital re¬covery and (b) equivalent annual total cost. Ma¬chine Semi2 has a first cost of $80,000 and an operating cost of $21,000 in year 1, increasing by $500 per year through year 5, after which time it will have a salvage value of $13,000. Machine Auto 1 has a first cost of $62,000 and an operating cost of $21,000 in year 1, increasing by 8% per year through year 5, after which time it will have a scavenge value of $2000. Utilize an interest rate of 10% per year to determine both estimates.

7. A new bridge across the Allegheny River in Pittsburgh is expected to be permanent and will have an initial cost of $30 million. This bridge must be resurfaced every 5 years at a cost of $1 million. The annual inspection and operating costs are esti¬mated to be $50,000. Determine its equivalent an¬nual worth at an interest rate of 10% per year.

8. A manufacturing software engineer at a major aerospace corporation has been assigned the management responsibility of a project to design, build, test, and implement AREMSS, a new-generation automated scheduling system for routine and expedited maintenance. Reports on the disposition of each service will also be entered by field personnel, then filed and archived by the system. The initial application will be on existing Air Force in-flight refueling air¬craft. The system is expected to be widely used

Cost Category	1	2	3	4	5	6 on 10	18
Field study Design of system Software design Hardware purchases Beta testing Users manual development System implementation Field hardware Training trainers Software upgrades	0.5 2.1	1.2 0.6 0.1 0.1	0.5 0.9 5.1 0.2 0.1 0.4 0.3	0.2 1.3 6.0 2.5	0.2 0.7 2.9 2.5	0.06 0.7 0.6    3.0	3.7

over time for other aircraft maintenance schedul-ing. Once it is fully implemented, enhancements will have to be made, but the system is expected to serve as a worldwide scheduler for up to 15,000 separate aircraft. The engineer, who must make a presentation next week of the best esti-mates of costs over a 20-year life period, has decided to use the life-cycle cost approach of cost estimations. Use the following information to determine the current annual LCC at 6% per year for the AREMSS scheduling system.

8. In 2010, the city of Houston. Texas. collected $24.112.054 in fines from motorists because of traffic violations caught by red-light cameras. The cost of operating the system was $8.432372. The net profit. that is, profit after operating costs. is split equally (that is. 50% each) between the city and the operator of the camera system. What will be the rate of return over a 3-year period to the contractor that paid for. installed, and operates the system. if its Initial cost was $9.000.000 and the profit for each of the 3 years is the same as it was in 2010?

9. Water damage from a major flood in a Midwest¬ern city resulted in damages estimated at $108 million. As a result of the claimant payouts. insurance companies raised homeowners' Insur¬ance rates by an average of $59 per year for each of the 160.000 households in the affected city. If a 20-year study period is considered, what was the rate of return on the $108 million paid by the insurance companies?

10. For the cash flows shown. determine the rate of return.

Year	0	1	2	3	4	5
Expenses, $	-17000	-2500	-2500	-2500	-2500	-2500
Revenue, $	0	5000	6000

11 Prepare a tabulation of Incremental cash flows for the two machine alternatives below.

	Machine X	Machine Y
First cost. S	-35.000	-90.000
Annual operating cost. S per year	-31.000	-19.400
Salvage value. S	0	8.000
Life. years

8.17 As groundwater wells age. they sometimes begin to pump sand (and they become known as "sanders"). and this can cause damage to downstream desalting equipment. This situation can be dealt with by drill¬ing a new well at a cost of $1.000.000 or by install¬ing a tank and self-cleaning screen ahead of the desalting equipment. The tank and screen will cost $230.000 to install and 561.000 per year to operate and maintain. A new well will have a pump that is more efficient than the old one. and it will require almost no maintenance. so its operating cost will be only S18.000 per year. If the salvage values are es¬timated at 10% of the first cost. use a present worth relation to

(a) calculate the incremental rate of return and

(b) determine which alternative Is better at a MARI? of 6% per year over a 20-year study period

9. Konica Minolta plans to sell a copier that prints documents on both sides simultaneously, cutting in half the time it takes to complete big commercial jobs. The costs associated with producing chemically-treated vinyl rollers and fiber-Impregnated rubber rollers are shown below. Determine which of the two types should be selected by calculating the rate of return on the incremental investment. Assume the company's MARR is 21% per year.

10. The Texas Department of Transportation (TxDOT) is considering two designs for crash barriers along a reconstructed portion of 1-10. Design 2R will cost S3 million to install and $135.000 per year to maintain. Design 4R will cost $33 million to install and 570.000 per year to maintain. Calculate the rate of return and determine which design is preferred if TxDOT uses a MARR of 6% per year and a 20-year project period.