Answered: At the end of their useful lives…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

. At the end of their useful lives alternatives A and C will be replaced with identical replacements (the repeatability assumption) so that a 20-year service requirement (study period) is met. Which alternative should be chosen and why?

b. Now suppose that at their end of their useful lives, alternatives A and C will be replaces with replacement alternatives having an 8% internal rate of return. Which alternative should be chosen and why?

Consider these mutually exclusive alternatives. MARR = 8% per year, so all the alternatives are acceptable.
Alternative
B
$425
$49.92
20
10%
Capital investment (thousands)
Uniform annual savings (thousands)
Useful life (years)
Computed IRR (over useful life)
A
$280
$45.57
10
10%
C
$550
$145.09
5
10%

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