Answer Happy

3.2 Each van has a diesel engine and therefore are costly and environmentally unfriendly They are 8 years old and can be sold for £2,500 each. Assume their market value (MV) in 2 years will be £300 each. Each van's annual maintenance expenses are expected to be £300 into the foreseeable future and they average only 35 miles per gallon of diesel. Diesel costs £6.00 per gallon, and each van will be used for about 3000 miles per year. If you sell the old vans, you can buy a newer model for £12,000. It will be under a maintenance warranty for two years, so this expense is negligible. The newer van will be a hybrid and therefore it would average 56 miles per gallon of fuel and will have an MV of £9,500 in two years. Use a two-year study period to determine which alternative is preferred. The MARR is 12% per year. (20%] 3.3 A steel works company purchased a plasma cutter, large scale metal cutting, 3 years ago at a cost of £127,000. The current market value of the machine is £100.000 andit can be kept in service for more than 8 year. MARR is 15% annually and the project net annual receipts and end-of-year market values for the machine are shown below. When is the best time for the company to abandon using this equipment? End of Year 2 5 7 8 Net Annual Receipts 45,000 45,000 40,000 35,000 30,000 22,000 19,000 15,000 Market Value 97,000 90,000 81,000 75,000 70,000 60,000 52,000 42,000 3 1 4 6