Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 12, Problem 23P
If the interest rate is 8% per year, what decision would you make based on the decision tree diagram in Figure P12-23?
Figure P12-23 Decision Tree Diagram for Problem 12-23
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Two 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.
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
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
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- 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) $138,540arrow_forwardRevenue 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_forwardall dropdown options are same as the one shownarrow_forward
- MARR is 10% per year. Compare the two plans using the Capitalized Cost Method. The first plan calls for an initial investment of $500,000, with expenses of $20,000 per year for the first 20 years and $30,000 per year thereafter. It also requires an expenditure of $200,000 20 years after the initial investment, and this will repeat every 20 years thereafter. The second plan has an initial investment of $700,000 followed by a single (one time) investment of $300,000 30 years later. It will incur annual expenses of $10,000 forever. Based on the Capitalized Cost measure.Which plan would you recommend?arrow_forwardSix projects have been identified for possible implementation by a company that makes dry ice blasters, machines that propel tiny dry ice pellets at supersonic speeds so they flash freeze and then lift grime, paint, rust, mold, asphalt, and other contaminants off of in-place machines and a wide range of surfaces. The present worth of each project has been determined. Identify all acceptable mutually exclusive bundles if the budget limitation is $31,000. Project PW Project at 15%, $ L 29,000 M 11,000 N 41,000 O 35,000 P 6,000 Q 2,000arrow_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_forward
- There 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_forwardDefine economic feasibilityarrow_forwardTwo mutually exclusive design alternatives are being considered for purchase. Doing nothing is also an option. The estimated cash flows for each alternativeare given below. The MARR is 8% per year. Using the PW method, which alternative, if either, should be recommended? State your assumptions and your reasoning in arriving at a recommendation.arrow_forward
- Three 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_forwardTwo 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_forwardA bridge design firm is performing an economic analysis of two mutually exclusive designs for a highway overpass. The steel girder option has an initial cost of $2.26 million, and the concrete option has an initial cost of $2.33 million. Every 25 years, the steel bridge must be painted at a cost of $560,000, and all other maintenance costs are the same for both options. The steel bridge is expected to last 50 years, and concrete bridge is expected to last 75 years. Based on the shortest acceptable analysis period, determine the present worth of costs for the best option using an interest rate of 7%. Express your answer in $ to the nearest $10,000.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education
Decision Tree Analysis - Intro and Example with Expected Monetary Value; Author: Vincent Stevenson;https://www.youtube.com/watch?v=cbCsCQ4l4Zs;License: Standard Youtube License