Motors from two different manufacturers are being considered. Motor A is 45hp and Motor B is 60hp, both are 460 volts, 3-phase and 60 Hz, but motor A operates at 80% efficiency whereas motor B operates at 88% efficiency. The expected life of motor A is 20 years and Motor B is 18 years. Motor A costs P60,000 and Motor B costs P75,000. Electrical energy costs P2.00 per kwh and the motors will be operated 8 hours per day, 250 days per year. Motor A has P5000 year maintenance and Motor B has P4500 per year maintenance. Motor A has a salvage value of P3000. Assume taxes are 30%. Which motor should be purchased if money worth 15% and how much is needed yearly cost for this motor?

Motors from two different manufacturers are being considered. Motor A is 45hp and Motor B is 60hp, both are 460 volts, 3-phase and 60 Hz, but motor A operates at 80% efficiency whereas motor B operates at 88% efficiency. The expected life of motor A is 20 years and Motor B is 18 years. Motor A costs P60,000 and Motor B costs P75,000. Electrical energy costs P2.00 per kwh and the motors will be operated 8 hours per day, 250 days per year. Motor A has P5000 year maintenance and Motor B has P4500 per year maintenance. Motor A has a salvage value of P3000. Assume taxes are 30%. Which motor should be purchased if money worth 15% and how much is needed yearly cost for this motor?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The firm is considering two machines: Machine A with initial investment of $10,000 and annual maintenance cost of $1,000. The life of the machine A is 4 years. Machine B with initial investment of $20,000 and annual maintenance cost of $800. The life of the machine B is 6 years. If the required rate of return is 10%, calculate the equivalent annual cost (EAC) of each machine and which machine company must choose? (A) The EAC of Machine A is $4,154.71 and Machine B is $5,392.15. The Company must choose Machine B. (B) The EAC of Machine A is $4,154.71 and Machine B is $5,392.15. The Company must choose Machine A. (C) The EAC of Machine A is $3,169.87 and Machine B is $3,484.21. The Company must choose Machine B. (D) The EAC of Machine A is $3,169.87 and Machine B is $3,484.21. The Company must choose Machine A.
A new heat exchanger must be installed by CSI, Inc. Alternative A has an initial cost of $33,400, and Alternative B has an initial cost of $47,500. Both alternatives are expected to last 10 for years. The annual cost of operating the heat exchanger depends on ambient temperature in the plant and on energy costs. The estimate of the cost and probabilities for each alternative is given. If CSI has a MARR of 8% and uses rate of return analysis for all capital decisions, which exchanger should be purchased?
The firm is considering two machines: Machine A with initial investment of $10,000 and annual maintenance cost of $1.000. The life of the machine A is 4 years. Machine B with initial investment of $20,000 and annual maintenance cost of $800. The life of the machine B is 6 years. If the required rate of return is 10%, calculate the equivalent annual cost (EAC) of each machine and which machine company must choose? (A) The EAC of Machine A is $4,154.71 and Machine B is $5,392.15. The Company must choose Machine B. (B) The EAC of Machine A is $4,154.71 and Machine B is $5,392.15. The Company must choose Machine A. (C) The EAC of Machine A is $3,169.87 and Machine B is $3,484.21. The Company must choose Machine B. (D) The EAC of Machine A is $3,169.87 and Machine B is $3,484.21. The Company must choose Machine A. Answer A D.
The firm is considering two machines: Machine A with initial investment of $10,000 and annual maintenance cost of $1,000. The life of the machine A is 4 years. Machine B with initial investment of $20,000 and annual maintenance cost of $800. The life of the machine B is 6 years. If the required rate of return is 10%, calculate the equivalent annual cost (EAC) of each machine and which machine company must choose?
An electric motor is rated at 10 horsepower (HP) and costs $800. Its full-load efficiency is specified to be 85%. A newly designed, high-efficiency motor of the same size has an efficiency of 90%, but costs $1,200. It is estimated that the motors will operate at a rated 10-HP output for 1,500 hours a year, and the cost of energy will be $0.07 per kilowatt-hour. Each motor is expected to have a 15-year life. At the end of 15 years, the first motor will have a salvage value of $50, and the second motor will have a salvage value of $100. Consider the MARR to be 8%. (Note: l HP= 0.7457kW.)(a) Determine which motor should be installed based on the PW criterion.(b) What if the motors operated 2,500 hours a year instead of 1,500 hours ayear? Would the motor selected in (a) still be the choice?
The purchase of one of two 500hp motors A and B is better considered. Motor A costs P12,000 and P3,000 to install. Motor B costs P15,000 and P5,000 to install. Motor A is 95% efficient, with P150 annual maintenance. Motor B is 92% efficient with P300 annual maintenance. Fixed charges are 15% and energy cost P750 and hour to run the less efficient motor. Fixed charges are based on installed cost of motors. a. Determine the break-even point in hours of use per year b. If the actual hours use per year is estimated as 3000 which motor would you recommend and what would be the savings. Show solutions.
The estimated cost of a completely installed andready-to-operate 40-kilowatt generator is $32,000. Itsannual maintenance costs are estimated at $800. Theenergy that can be generated annually at full load isestimated to be 100,000 kilowatt-hours. If the valueof the energy generated is $0.09 per kilowatt-hour,how long will it take before this machine becomesprofitable? Take the MARR to be 10% and the salvage value of the machine to be $2,000 at the end ofits estimated life of 15 years.
Dorf Motors Manufacturing must replace one of its tow motors. The net present cost of Alternative A is $8956, Alternative B is $5531, and Alternative C is $4078. Alternative A is expected to last for 12 years; Alternative B has an expected life of 7 years; and Alternative C is expected to last for 5 years. If Dorf’s MARR is 5%, which Alternative (if any) should be chosen using EUAC.
An engineering consultancy firm makes an economic analysis of two machines that will be purchased. Machine B has an estimated life span of 14 years and would cost P20,000 with an annual maintenance cost of P300. Machine A has an estimated life span of 6 years and would cost P10,000 with an annual maintenance cost is expected to be 20% less with the Machine B. There will be an annual insurance cost that amounts to the 1% of the first cost of the machines. Machine A was a disposable machine while Machine B can be salvaged for P6,000. Based on its annual worth, what should the consultancy firm choose if the minimum attractive rate of return is 8% per annum.
Two electric motors are being considered to drive a centrifugal pump. One of the motors must be selected. Each motor is capable of delivering 60 horse power (output) to the pumping operation. It is expected that the motors will be in use 800 hours per year. The following data are available: Solve, a. If electricity costs $0.07 per kilowatt-hour, which motor should be selectedif the MARR is 8% per year? Recall that 1 hp = 0.746 kW. Assume repeatability. b. What is the basic trade-off being made in this problem?
A special-purpose 30-horsepower electric motor has an efficiency of 90%. Its purchase and installation price is $2,200. A second 30-horsepower high-efficiency motor can be purchased for $3,200, and its efficiency is 93%. Either motor will be operated 4,000 hours per year at full load, and electricity costs $0.10 per kilowatt-hour (kWh). MARR = 15% per year, andneither motor will have a market value at the end of the eight-year study period.Most motors are operated at a fraction of their rated capacity (i.e., full load) in industrial applications. Suppose the average usage (load factor) of the motor is expected to be 60%.Which motor should be recommended under this condition?
Two machines are being considered for the production of a particular part for which there is a long term-demand. Machine A cost P50,000.00 and is expected to last 3 years and have a P10,000 salvage value. Machine B costs P75,000.00 and is expected to last 6 years and have zero salvage value. Machine A can produce a part in 18 seconds; Machine B requires only 12 seconds per part. The out-of-pocket hourly cost of operation is P38.00 for A and P30.00 for B. Monthly Maintenance cost are P200.00 for A and P220.00 for B. If interest on invested capital is 25%, determine the number of parts per year at which the machines are equally economical. If the expected number of parts per year is greater than this break-even quantity, which machine would be favored?

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