7 Omega Racing and PerformanceMotor Corporation wishes toevaluate two alternative CNCmachines for NHRA enginebuilding. The estimated cash flowsare shown in Table below. Use theAnnual Worth (AW) method atinterest 10% per year to select thebetter alternativeAnnualoperating - 40,000 - 50,000cost, $Salvagevalue, $10%n123456Firstcost, $ 250,000 370,000778910Life,years1.10001.21001.33101.46411.61051.77161.94872.14362.35792.5937Single PaymentsCompound Present Sinking CompoundAmountF/PWorth FundP/FA/F050911.000000.8264 0.476190.75130.6830Machine MachineRS0.62090.56450.51320.4665TABLE 15 Discrete Cash Flow: Compound Interest FactorsUniform Series PaymentsPresentCapitalAmount Recovery WorthF/AA/PP/A0.424120,000 30,0000.38550.302110.215470.163800.1296130.105410.087440.073640.062751.00002.10003.31004.64106.10517.71569.487211.435513.579515.93741.100000576150.402110.315470.263800.229610.205410.187440.173640.162750.90911.73562.48093.16993.79084.35534.868455.33495.75906.1446Arithmetic GradientsGradientPresent WorthP/G082642.32914.37816.86189.681212.763116.028719.421522.891310%GradientUniform SeriesA/G0.47620.93661.38121.81012.22362.62163,00453.37243.7255

In economics, annual worth refers to the present value of a series of cash flows that occur annually…

Omega Racing and Motor Corporation wishes to evaluate two alternative CNC machines for NHRA engine building. The estimated cash flows are shown in Table below. Use the Annual Worth (AW) method at interest 10% per year to select the better alternative Performance Annual Machine Machine R S First cost, $ 250,000 370,000

Omega Racing and Motor Corporation wishes to evaluate two alternative CNC machines for NHRA engine building. The estimated cash flows are shown in Table below. Use the Annual Worth (AW) method at interest 10% per year to select the better alternative Performance Annual Machine Machine R S First cost, $ 250,000 370,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Kaneb is evaluating two alternative pipeline welders. Welder A costs $310,000, has a 7-year life, and is expected to generate net cash inflows of $78,000 in each of the 7 years. Welder B costs $320,000, has a 5-year life, and is expected to generate annual net cash inflows of $68,900 in each of the 5 years. Kaneb's cost of capital is 16%. Using the equivalent annual annuity method, which alternative should be chosen and what is its NPV?
A drug store is looking into the possibility of installing a 24/7-automatedprescription refill system to increase its projected revenues by $20,000 per year over the next 5 years. Annual expenses to maintain the system are expected to be $5,000. The system will cost $50,000 and will have no market value at the end of the 5-year study period. The store’s expected rate of return is 20% per year. Use the AW method to evaluate this investment. What is the annual worth? Is it a desirable investment? *
A company is considering two alternatives for manufacturing a certain part. Method R will have a first cost of $40,000, and annual operating cost of $25,000, and a $10,000 salvage value after its five-year life. Method S will have an initial cost of $100,00, an annual operating cost of $15,000 and a $12,000 salvage value after its 10-year life. At an interest rate of 12% per yr, the present worth values of the alternatives are closest to; A. PWR = $ 124,446 PWR= $180,889 B. PWR = $ 124,446 PWR= $147,263 (ANSWER) C. PWR= $195,057 PWS= $180,886 D. PWR= $195,057 PWS=$147,263
E3 Your company plans to raise price on product A by 5% per year. Due to competition, sales volume from product A is expected to decline at 10% per year. Revenue will be $5M for this year. Alternatively, based on the projection from the marketing department, you may reduce the sales volume decline from 10% to 5% if the price is kept unchanged. The product will be discontinued at the end of year 5 for both scenarios. If the firm's TVOM is 10%, Determine the revenue cash flow streams for both alternatives. What is the Excel financial function to compute PW of the revenue streams?
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The Briggs and Stratton Commercial Division designs and manufacturers small engines for golf turf maintenance equipment. A robotics-based testing system with support equipment will ensure that their new signature guarantee program entitled "Always Insta-Start" does indeed work for every engine produced. Pull System Push System First cost of equipment $-1,300,000 $-2,400,000 AOC per Year $-720,000 $-520,000 Salvage Value $110,000 $100,000 Estimated Life 8 years 8 years Compare the annual worth of the two systems at MARR = 14% per year. Select the better system. The (Click to select) pull system push system is determined to be the better system.
Concurris Prototyping is committed to using the newest and finest equipment in its labs. Accordingly, Wilma, a senior engineer, has recommended that a 2-year-old piece of precision measurement equipment be replaced immediately. She believes it can be demonstrated that the proposed equipment is economically advantageous at a 15%-per year return and a planning horizon of 5 years. Perform the replacement analysis using the annual worth method, a 5-year study period, and the estimates below. Was Wilma correct? Equipment Current Proposed Original purchase price, $ −30,000 −36,000 Current market value, $ 15,000 -- Remaining life, years 5 15 Estimated value in 5 years, $ 7,000 10,000 Salvage value after 15 years, $ -- 5,000 AOC, $ per year −7,000 −3,000 The AW of the defender is $− and the AW of the challenger is $− . Wilma (Click to select) is is not correct.
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Bob and Mary Johnson are expecting their first child.They have decided to deposit $1000 into a savings account that pays 6% interest compounded annually on the day the child is born. They will then deposit $1000 on each birthday through the child’s 18th birthday. How much money will be in the account on the child’s 19th birthday to finance a college education? (Answer must be: $35,786) Solutions manual only with formula, without using Microsoft Excel.
Consider two air-conditioning systems with the estimates below. (a) Use AW analysis to determine the sensitivity of the economic decision to MARR values of 4%, 6%, and 8% per year. (b) Develop the spreadsheet functions that will display the six AW values. System 1 2 First cost, $ −10,000 −17,000 AOC, $ per year −600 −150 Salvage value, $ −100 −300 New compressor and motor cost at midlife, $ −1,750 −3,000 Life, years 8 12
A large textile company is trying to decide which sludge dewatering process it should use ahead of its sludge drying operation. The costs associated with centrifuge and belt press systems are shown. Compare them on the basis of their annual worths using an interest rate of 10% per year. System Centrifuge Belt Press First cost, $ −235,000 −150,000 AOC, $/year −48,000 −41,000 Overhaul in year 2, $ -- −26,000 Salvage value, $ 40,000 10,000 Life, years 6 4 The annual worth of the centrifuge system is $− , and the annual worth of the belt press system is $− . The system selected on the basis of the annual worth analysis is the (Click to select) belt press centrifuge system.