Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 16, Problem 5P
(a):
To determine
Calculate the benefit cost ratio.
(b):
To determine
Calculate the incremental benefit cost ratio.
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The Consolidated Oil Company must install antipollution equipment in a new refinery to meet federal clean-air standards. Four design alternatives are being considered, which will have capital investment and annual operating expenses as shown. Assuming a useful life of 8 years for each design, no market value, a desired MARR of 10% per year, determine which design should be selected on the basis of the PW method. Confirm your selection by using the FW and AW methods. Which rule applies? Why?
A sewage containment project in Louisiana is expected to require an initialinvestment of $3 million and annual maintenance expenses of $57,000. Thebenefits to the public are valued at $460,000 per year. This project can be assumed to have an infinite life. If MARR is 10% per year, determine whether the project is economically attractive using the B–C ratio measure of merit.
The City of Manila contemplates to increase the capacity of its existing water transmission line. Two plans are under consideration. Plan A requires the construction of a parallel pipe line, the flow being maintained by gravity. The initial cost is P2,750,000 and the life is 40 years, with an annual operating cost of P50,000.
Plan B requires the construction of a booster pumping station costing P1,050,000 with a life of 40 years. The pumping equipment costs an additional amount of P250,000. It has a life of 20 years and a salvage value of P25,000. The annual operating cost is P165,000.
If the interest rate is 12%, which is the more economical plan and by how much lower than the other?
Plan B lower than Plan A by P115,906.57
Plan B higher than Plan A by P15,906.57
Plan A higher than Plan B by P15,906.57
Plan A lower than Plan B by P115,906.57
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Contemporary Engineering Economics (6th Edition)
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