Three years ago Chicago's O'Hare Airport purchased a new fire truck. Because of flight in- creases, new fire-fighting capacity is needed once again. An additional truck of the same capac- ity can be purchased now, or a double-capacity truck can replace the current fire truck. Esti- mates are presented below. Compare the options at 12% per year using (a) a 12-year study period and (b) a 9-year study period. Presently owned First cost P. S AOC, S Market value, $ Salvage value, $ Life, years -151,000 (3 years ago) -1,500 70,000 10% of P 12 New Purchase -175,000 -1,500 12% of P 12 Double Capacity -190,000 -2,500 10% of P 12

Three years ago Chicago's O'Hare Airport purchased a new fire truck. Because of flight in- creases, new fire-fighting capacity is needed once again. An additional truck of the same capac- ity can be purchased now, or a double-capacity truck can replace the current fire truck. Esti- mates are presented below. Compare the options at 12% per year using (a) a 12-year study period and (b) a 9-year study period. Presently owned First cost P. S AOC, S Market value, $ Salvage value, $ Life, years -151,000 (3 years ago) -1,500 70,000 10% of P 12 New Purchase -175,000 -1,500 12% of P 12 Double Capacity -190,000 -2,500 10% of P 12

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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