Compare the following alternatives on the basis c heir capitalized costs at i= 8% per year and selec he best alternative. Alternative Alternative 1 Alternative 2
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- Compare the following investment alternatives using ROR analysis. MARR is %12 per annum. Alternative-A Alternative-B First cost, $ 240,000 450,000 Uniform annual benefit, $ 52,000 84,000 Salvage value, $ 120,000 230,000 Life, year 20 InfiniteBASED ON ESTIMATES THE DATA FOR TWO TYPES OF BRIDGES WITH DIFFERENT LIVES ARE AS FOLLOWS. IFTHE MINIMUM RATE OF RETURN IS 9%, DETERMINE W/C PROJECT IS MORE DESIRABLE. TIMBER BRIDGE STEEL BRIDGEFIRST COST P 50,000.00 P 140,000.00SALVAGE VALUE 2,000.00 10,000.00LIFE IN YEARS 12 36ANNUAL MAINTENANCE 6,000.00 2,500.00EVALUATE USING:A.) THE ANNUAL COST METHODB.) PRESENT WORTH COST METHODC.) RATE OF RETURN METHOD4. Using the incremental B / C analysis (∆B/C). Determine the best alternative.5. Using the incremental rate of return (∆RoR) analysis. Determine the best alternative. MARR =10%. A B C DFirst cost 45,000 $25,000 $35,000 $15,000O &M Cost/year $4,000 $1,500 $3,000 $2,000Benefit/year $15,000 $9,500 $14,000 $8,000Salvage value $9,000 $5,000 $7,000 $3,000Life in years 10
- An engineering firm has identified five ways to cut costs in its main office. Only one of the options can be implemented, however, since each involves significant training time for staff engineers. Data are provided in the table. Each option has a lifetime of seven years, and the firm sets a MARR at 15%. Option A B C D E Capital cost ($ million) 2.713 0.375 1.650 0.088 0.950 Annual cost ($ million/yr 0.093 0.275 0.132 0.147 0.228 Annual benefit ($ million/yr) 0.890 0.288 0.841 0.312 0.505 a) Solve by present worth analysis. b) Solve by annual cash flow analysis. c) Solve by incremental benefit-cost ratio analysis. d) Solve by an incremental rate of return analysis using the full detailed procedureA firm is considering the “make vs. buy” question for a subcomponent. If the part is made in-house, the production data would be: first cost = $350, 000; annual costs for operation = $45, 000; salvage value = $15, 000; project life = 5 years; interest = 10%; and material cost per unit = $8.50. If annual production is 10,000 units, the maximum amount that the firm should be willing to pay to an outside vendor for the subcomponent is nearest? (a) $10 per unit (b) $16 per unit (c) $22 per unit (d) $28 per unit?ΔRoR for the first increment (Alt. C-Alt. A) is ___________________. Alt. A Alt. B Alt. C Initial cost $5,000 9,000 7,500 Annual benefits $1,457 2,518 2,133 RoR 14% 12.4% 13% Life in years 5 Group of answer choices 10.12% 11.00 11.85% 9.38%
- The product development group of a high-tech electronics company developed five proposals for new products. The company wants to expand its product offerings, so it will undertake all projects that are economically attractive at the company’s MARR of 20% per year. The cash flows (in $1000 units) associated with each project are estimated. Which projects, if any, should the company accept on the basis of a present worth analysis? Project A B C D E Initial investment, $ −400 −510 −660 −820 −900 Operating cost, $/year −100 −140 −280 −315 −450 Revenue, $/year 360 235 400 605 790 Salvage value, $ — 22 — 80 95 Life, years 3 10 5 8 4Municipal Engineer wants to evaluate three alternatives for supplementing the water supply. 1st alternative – continue deep well pumping at an annual cost of $10,500 2nd alternative – install a 10” pipeline from a surface reservoir. First cost is $25,000 and annual pumping cost is $7,000 3rd alternative – install a 20” pipeline from the reservoir. First cost of $34,000 and annual pumping cost of $5,000. Life of all alternatives is 20 years. For the second and third alternatives, salvage value is 10% of first cost. With interest at 8%, which alternative should the engineer recommend? Use present worth analysis PW (deepwell) = ? PW (10”pipeline) = ? PW (20”pipeline) = ?Tempe Inc. is considering four mutually exclusive public projects. The capital investment requirements, annual operating & maintenance (O&M) costs, and salvage values of these projects are given below. Each project has a useful life of 40 years, and the minimum attractive rate of return for Tempe is 11% per year. Which of the four projects, if any, should be selected? A B C D Capital Investment $21,500,000 $16,800,000 $30,400,000 $25,700,000 Annual Benefit 4,800,000 4,250,000 5,900,000 4,900,000 Annual O&M Cost 1,790,000 1,130,000 2,040,000 1,800,000 Market Value 2,260,000 2,080,000 3,800,000 2,900,000
- Determine which alternative is the most viable by incremental B / C (values in thousands),considering an interest rate of 3%A B C D E FInitial cost 500 550 300 550 500 600Total annual costs $ 360 480 180 600 300 660Annual income $ 550 620 325 900 550 800Against annual profits 300 300 400 300 300 200 ---Methods of economic evaluation of alternatives----Consider these two alternatives.Alternative A Alternative BCapital investment OMR 6000 7500Annual revenues OMR 1800 2250Annual expenses OMR 500 750Estimated market valueOMR1200 1600Useful life 10 10MARR 12% 1. Recommend which alternative should be selected.2. How much capital investment of the expensive alternative have to vary so that theinitial decision would be reversed.A municipal power plant uses natural gas from an existing pipeline at an annual cost of $40,000 per year. A new pipeline would initially cost $100,000, but it would reduce the annual cost to $10,000 per year. (a) Assume an analysis period of 25 years and no salvage value for either pipeline. The interest rate is 6%. Using the equivalent uniform annual cost (EUAC), should the new pipeline be built? (b) The power plant uses natural gas. What are some of the noneconomic benefits to the municipality of this energy source over others? Develop three primary advantages and disadvantages.