8-28 A firm is considering three mutually exclusive alter- natives as part of a production improvement pro- A gram. The alternatives are as follows: A В Installed cost $10,000 $15,000 $20,000 1,625 Uniform annual benefit 1,625 1,890 Useful life, in years 10 20 20 For each alternative, the salvage value at the end of useful life is zero. At the end of 10 years, Alt. A could be replaced by another A with identical cost and benefits. (a) Construct a choice table for interest rates from 0% to 100%. (b) The MARR is 6%. If the analysis period is 20 vears which alternative should be selected?

8-28 A firm is considering three mutually exclusive alter- natives as part of a production improvement pro- A gram. The alternatives are as follows: A В Installed cost $10,000 $15,000 $20,000 1,625 Uniform annual benefit 1,625 1,890 Useful life, in years 10 20 20 For each alternative, the salvage value at the end of useful life is zero. At the end of 10 years, Alt. A could be replaced by another A with identical cost and benefits. (a) Construct a choice table for interest rates from 0% to 100%. (b) The MARR is 6%. If the analysis period is 20 vears which alternative should be selected?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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AN INDUSTRIAL PLANT IS CONSIDERING THE PURCHASE OF A CENTRIFUGAL PUMP. THREE OFFERS WERERECEIVED AND BASIS OF SELECTION HAVE BEEN TABULATED AS FOLLOWS: OFFER A OFFER B OFFER CPRICE OF PUMP P 60,000.00 P 96,000.00 P 120,000.00ECONIMIC LIFE (YEARS) 3 5 10SALVAGE VALUE @ END OF ECONOMIC LIFE P 5,000.00 P 10,000.00 P 8,000.00YEARLY MAINTENANCE COST 10,000.00 6,000.00 5,000.00IF COST OF MONEY IS 14%, WHAT OFFER WOULD YOU RECOMMEND TO BE PURCHASED? USE ROR METHOD.
A machine has a first cost of $10,000 and annual costs of $3500. There is no salvage value, and interest is 10%. If the project’s useful life is described by the following data, what is the annual worth of costs? Useful Life (years) 4 5 6 7 Prob. of life (%) 5 22 41 32 (a) $3500 (b) $5127 (c) $5554 (d) $5796
1. A machine cost P10M and will have scrap value of 10% of the first cost at theend of 10 years. If money is worth 12%. Find the annual investment and thecapitalized cost of the machine.
Given the two machines’ data Machine A Machine B First Cost P8,000.00 P14,000.00 Salvage value 0 2,000.00 Annual operation 3,000.00 2,400.00 Annual maintenance 1,200.00 1,000.00 Taxes and insurance 3% 3% Life, years 10 15 Money is worth at least 16% Using equivalent uniform annual cost method, determine the value of alternative A and alternative B: ANSWER for ALTERNATIVE A: Blank 1 ANSWER for ALTERNATIVE B: Blank 2
A manufacturer with a MARR of 20% is considering the installation of one of three packaging machines. The economic parameters of each machine are as follows: Packaging machine: X Y Z Initial cost ($) 20,000 40,000 15,000 Uniform annual benefit ($) 120,000 180,000 100,000 Uniform annual O&M cost ($) 70,000 50,000 70,000 Service life (years) 6 3 12 Salvage value end of life ($) 2,000 4,000 2,000 The present worth (PW) for machine X over the 12 years analysis period is:
A five-year project has an initial fixed asset investment of $613,600, an initial net working capital investment of $22,200. The project will have an annual operating cash flow (OCF) of (-$76,540). The fixed asset is fully depreciated over the life of the project and has no salvage value. The net working capital will be recovered when the project ends. The required return is 11.7 percent. What is the project's equivalent annual cost, or EAC? O-$248,052.76 O-$182,309.18 O-$147,884.01 O $242,212.22
3. One of four ovens at the bakery is being considered for replacement. Its salvage value and maintenance costs are given in the table below for several years. A new oven costs P80,000 and this price includes a complete guarantee of the maintenance costs for the first two years, and it covers a good proportion of the maintenance costs for 3 years and 4 years. The salvage value and maintenance costs are summarized in the table below. Both the old and new ovens have similar productivities and energy costs. Should the oven be replaced this year if the MARR equals to 10%?
3. The annual worth method An office supply company has purchased a light duty delivery truck for $15,000. It is anticipated that the purchase of the truck will increase the company’s revenue by $10,000 annually, whereas the associated operating expenses are expected to be $3,000 per year. The truck’s market value is expected to decrease by $2,500 each year it is in service. If the company plans to keep the truck for only 2 years, what is the annual worth of this investment? The MARR = 18% per year
1.) Clinix is considering four independent projects. Given: All the projects will be economically viable for only 10 years; Company’s MARR = 12% per year Find: Which project should be selected based on a present worth analysis. *Note* Financial values are in $1,000 units. Project A Project B Project C Project D First Cost ($) -2,700 -1,400 -10,000 -9,500 Annual Net Profit ($/year) 800 1,200 2,400 3,200 Salvage Value ($) 25 30 45 60
Rerform an EAC analysis and evaluate what decision to make regarding 2 challengers and 1 defender. Elaborate:a) Graphsb) EAC analysisc) Conclude the exercise and make a decision regarding the results Machine N1 (#1 challenger) useful life = 8 years Initial Cost $15,000 MARR 18% Year Operating costs Market value EAC 1 $ 355.00 $ 8,000.00 2 $ 500.00 $ 7,000.00 3 $ 788.00 $ 6,000.00 4 $ 1,000.00 $ 5,000.00 5 $ 1,355.00 $ 4,000.00 6 $ 1,688.00 $ 3,000.00 7 $ 2,012.00 $ 1,000.00 8 $ 2,345.00 $ 0.00
which process line should be built for a new chemical? the expected market for the chemical is 16 years. an 18% rate is used to evaluate new process facilities, which are compared with present worth. how much does the better choice save? First cost O &M cost/year salvage life A $14 M $2.5 M $2 M 8 years B 22 M 3 M 7.5 M 16 years
29. Solve Problem using annual worth method. CLC Publishing is considering the purchase of an offset printing machine. A study of three available alternatives shows the following estimates: A B C Acquisition Cost P700 000.00 P850 000.00 P1 000 000.00 Shipping Cost 5% 5% 8% Net Annual Benefit P155 000.00 P145 000.00 P170 000.00 Useful Life 8 years 16 years 16 years Salvage Value P35 000.00 P70 000.00 P80 000.00 (Ans. ATA= — P799.02; ATB = P3916.33; ATC = — P815.40)