A problem often discussed in the engineering economy literature is the “oil-well pump problem.' Pump 1 is a small pump; Pump 2 is a larger pump that costs more, will produce slightly more oil, and will produce it more rapidly. If the MARR is 20%, which pump should be selected? Assume that any temporary external investment of money earns 10% per year and that any temporary financing is done at 6%. Pump 1 Pump 2 Year ($000s) ($000s) -$100 -$110 1 70 115 3 70 30

A problem often discussed in the engineering economy literature is the “oil-well pump problem.' Pump 1 is a small pump; Pump 2 is a larger pump that costs more, will produce slightly more oil, and will produce it more rapidly. If the MARR is 20%, which pump should be selected? Assume that any temporary external investment of money earns 10% per year and that any temporary financing is done at 6%. Pump 1 Pump 2 Year ($000s) ($000s) -$100 -$110 1 70 115 3 70 30

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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