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(a)
Calculate the equivalent annual worth.
(a)
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Explanation of Solution
Model G: First cost (C) is $36,000. Operating cost (A) is $4,000. Salvage value (SV) is $15,000. Time period (n) is 3 years. Interest rate (i) is 15%.
Model F: First cost (C) is $32,000. Operating cost (A) is $3,100. Salvage value (SV) is $15,000. Time period (n) is 4 years. Interest rate (i) is 15%.
The equivalent annual worth of Model G (AWG) can be calculated as follows:
The annual worth of Model G is -$15,447.48.
The equivalent annual worth of Model F (AWF) can be calculated as follows:
The annual worth of Model F is -$11,304.54. Since the annual worth of Model F is greater than Model G, select Model F.
(b)
Calculate the present worth.
(b)
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Explanation of Solution
The time period to calculate the present worth is 12 years
The present worth of Model G is -$83,734.64.
The present worth of Model F (PF) can be calculated as follows:
The annual worth of Model F is -$61,277.41.
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Chapter 6 Solutions
EBK ENGINEERING ECONOMY
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