Kiwidale Dairy is considering purchasing a new ice-cream maker. Two models, Smoothie and Creamy, are available and their information is given below. Answer parts (a) and (b) below. First cost Service Life Annual profit Annual operating cost Salvage value Smoothie $16,000 12 years $4200 $1200 $2250 Creamy $38,000 12 years $10,800 $3520 $5000 a. What is Kiwidale's MARR that makes the two alternatives equivalent? Use a present worth comparison. Hint: Use i = 0.15 and i = 0.20 for the linear interpolation. The MARR that makes the two alternatives equivalent is approximately (Round to one decimal place as needed.) percent. b. It turned out that the service life of Smoothie was 14 years. Which alternative is better on the basis of the MARR computed in part (a)? Assume that each alternative can be repeated indefinitely. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 16.9%. The annual worth of the Smoothie ice-cream maker is $ (Round to the nearest cent as needed.) The annual worth of the Creamy ice-cream maker is $ The ice-cream maker is the better alternative.

Kiwidale Dairy is considering purchasing a new ice-cream maker. Two models, Smoothie and Creamy, are available and their information is given below. Answer parts (a) and (b) below. First cost Service Life Annual profit Annual operating cost Salvage value Smoothie $16,000 12 years $4200 $1200 $2250 Creamy $38,000 12 years $10,800 $3520 $5000 a. What is Kiwidale's MARR that makes the two alternatives equivalent? Use a present worth comparison. Hint: Use i = 0.15 and i = 0.20 for the linear interpolation. The MARR that makes the two alternatives equivalent is approximately (Round to one decimal place as needed.) percent. b. It turned out that the service life of Smoothie was 14 years. Which alternative is better on the basis of the MARR computed in part (a)? Assume that each alternative can be repeated indefinitely. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 16.9%. The annual worth of the Smoothie ice-cream maker is $ (Round to the nearest cent as needed.) The annual worth of the Creamy ice-cream maker is $ The ice-cream maker is the better alternative.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Kiwidale Dairy is considering purchasing a new ice-cream maker. Two models, Smoothie and Creamy, are available and their information is given below. (perform all calculation using 5 significant figures, and give your final answer to 1 decimal place). (a) What is Kiwidale's MARR that makes the two alternatives equivalent? Use a present worth comparison. Creamy First Cost 40,000 Service Life 12 years Annual profit 12,000 Annual operating cost 3,720 Salvage value 5,400 A MARR which makes the two alternatives equivalent in term of PW is Smoothie 15,000 12 years 4,700 1,400 2,250
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