Answered: $5,000 $8,000 $8,000 $8,000 $8,000…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A piece of new equipment has been proposed by engineers to increase the
productivity of a certain manual welding operation. The investment cost is $25,000, and the equipment will have a market value of $5,000 at the end of a study period of five years. Increased productivity attributable to the equipment will amount to $8,000 per year after extra operating costs have been subtracted from the revenue generated by the additional production. A cash-flow diagram for this investment opportunity is given below. If the firm’s MARR is 20% per year, is this proposal a sound one? Use the PW method.

$5,000
$8,000
$8,000
$8,000
$8,000
$8,000
1
3
5
End of Year
i = 20%/yr
$25,000

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