Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Chapter 12, Problem 19P
To determine
Calculate the standard deviation.
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In conducting a sensitivity analysis of a proposed project, the present worth values of $–10,000, $40,000, and $50,000 were believed to have chances of 25%, 40%, and 35%, respectively. The expected PW is closest to: (a) $19,000 (b) $26,000 (c) $28,500 (d) $31,000
A recent sensitivity analysis of a public works project indicates that the expected present worth is $83,000. If there is a 20% chance that the PW will be the pessimistic one of $45,000 and 50% chance that it will be the most likely one of $72,000, the optimistic PW is closest to: (a) $89,520 (b) $118,380 (c) $126,670 (d) $138,540
All of the following are steps in the procedure for conducting a sensitivity analysis, except: (a) Determine which parameters might vary from the most likely estimated value (b) Change the parameters in the range of −100% to +100% (c) Select a measure of worth (d) Compute the results for each parameter using the measure of worth as a basis
Chapter 12 Solutions
Engineering Economy (17th Edition)
Ch. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - A new snow making machine utilizes technology that...Ch. 12 - Prob. 4PCh. 12 - Prob. 5PCh. 12 - Prob. 6PCh. 12 - Prob. 7PCh. 12 - Prob. 8PCh. 12 - Prob. 9PCh. 12 - Prob. 10P
Ch. 12 - Prob. 11PCh. 12 - Prob. 12PCh. 12 - Prob. 13PCh. 12 - Prob. 14PCh. 12 - Prob. 15PCh. 12 - Prob. 16PCh. 12 - Prob. 17PCh. 12 - Prob. 18PCh. 12 - Prob. 19PCh. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - If the interest rate is 8% per year, what decision...Ch. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26SE
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- Revenue into the general fund of the state of Texas for any biennium is highly dependent on the price of oil. At a price average of $50 per barrel, general revenue will be $95 billion. At $68 and $75 per barrel, the revenue will be $118 billion and $125 billion, respectively. If the chances are estimated at 10%, 35%, and 55% for oil prices of $50, $68, and $75 per barrel for the next biennium, respectively, the expected revenue (in $ billion) is closest to: (a) $117.38 (b) $118.02 (c) $118.92 (d) $119.50arrow_forwardDefine economic feasibilityarrow_forwardWhen conducting a sensitivity analysis using three estimates for each parameter, all of the following are estimates that should be made, except: a) Pessimistic (b) Improbable (c) Optimistic (d) Most likelyarrow_forward
- Two designs are suitable for housing track and field events. Design N costs $800,000 with annual upkeep costs including maintenance, repair, heat, and janitor service, of $25,000 a year. Its life is expected to be permanent. Design T costs $450,000 with annual upkeep costs for the previous items of $35,000 a year. However, with this design, repairs costing $15,000 will be required every 5 years, and the life will be 25 years with a probable salvage at that date of $50,000. The minimum required rate of return is 10%. Use present worth analysis to compare these two alternatives.arrow_forwardall dropdown options are same as the one shownarrow_forwardTwo mutually exclusive design alternatives are being considered the estimated cash flow's for each alternative are given below. The MARR is 12% per year. The decision-maker can select one of these alternatives, or decide to select none of them make a recommendation based on the following methods.arrow_forward
- The ford motor company is considering three mutually exclusive electronic stability control systems for protection against rollover of its automobiles. The investment (study) period is four years, and MARR is 12% per year. Data for the fixture costs of the systems are as follows: plot the AW of each alternative against MARR as the MARR varies across this range:4%, 8%, 12%, 16%, and 20%. What can you generalize about the range of the MARR for which each alternative is preferred?arrow_forwardConsolidated Edison Power is evaluating the construction of a new electric generation facility. The two choices are a coal-burning plant (CB) and a gaseous diffusion (GD) plant. The CB plant will cost $160 per megawatt to construct, and the GD plant will cost $180 per megawatt. Owing to uncertainties concerning fuel availability and the impact of future regulations related to air and water quality, the useful life of each plant is unknown, but the following probability estimates have been made .a. Determine the expected life of each plant. b. Based on the ratio of construction cost per megawatt to expected life, which plant would you recommend that Con Ed build?arrow_forwardAre the investment decisions based solely on an estimate of a project's profitability?arrow_forward
- When the country’s economy is expanding, AB Investment Company is optimistic and expects a MARR of 15% on new investments. However, in a receding economy the expected return is 8%. Normally a 10% per year return is anticipated. An expanding economy causes the estimates of project life to go down about 20%, and a receding economy causes the life values to increase about 10%. Additionally, the market value after the project’s life varies widely; optimistically, it may be as high as 50% more or as low as 75% of the initial investment. (a) Summarize the optimistic, most likely, and pessimistic estimates in tabular form. (b) Use a spreadsheet to calculate and plot the sensitivity of PW versus (1) MARR, (2) life values, and (3) market value for possible investment in one of two locations. Use the most likely estimates for the other parameters. (c) Considering all the analyses, under which scenario, if any, should location Miami or Houston be rejected? All monetary values are in $1000 units.…arrow_forwardThere are two mutually exclusive projects Alpha and Beta. The Alpha alternative has a life of 3 years, an initial cost of $11,000, an expected annual income of $7,000, and a salvage value after 3 years of $2,000. The Beta alternative has a life of 5 years and is expected to have an annual income of $7,000, but the initial cost will be $17,000, with a salvage value of $3,000. A MARR of 9% will be used for the analysis. Solve: USING EXCEL (show the forumla) 1) Which project would be chosen using the Truncated Method and the VAE? 2) Calculate the discounted payback period of the second. 3) Index of profitability of the first 4) The IRR of the first.arrow_forwardThree mutually exclusive alternatives are being considered for the production equipment at a tissue paper factory. The estimated cash flows for each alternative are given here. (All cash flows are in thousands.)Which equipment alternative, if any, should be selected? The firm’s MARR is 20% per year. Please state your assumptions.arrow_forward
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