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 below. 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 (Section 6.2.2) applies? Why? (6.4)
Want to see the full answer?
Check out a sample textbook solutionChapter 6 Solutions
Engineering Economy, Student Value Edition (17th Edition)
Additional Business Textbook Solutions
Foundations of Economics (8th Edition)
Microeconomics
Econ Micro (book Only)
Principles of Microeconomics (MindTap Course List)
Economics of Money, Banking and Financial Markets, The, Business School Edition (4th Edition) (The Pearson Series in Economics)
- The PW-based relation for the incremental cash flow series to find A/* between the lower first-cost alternative X and alternative Y has been developed. 0=-38,000+9000(P/A‚¡ *,10) + (-2000(P/F,Ai*,10)) Determine the highest MARR value for which Y is preferred over X. Any MARR value less than % favors Y.arrow_forwardA municipal police department has decided to acquire an unnamed drone for aerial surveillance of a high-crime region in the city. Two drones are being studied and their data are provided in the table below. All alternatives are expected to have negligible salvage values at the end of 5 years. The police department's MARR is 8% per year. Which drone should be selected based on a. RORAI method? b. Annual Worth method? A Alternative Capital investment $740,000 Annual expenses $361,940 B Alternative Capital investment 1,840,000 Annual expenses $ 183,810arrow_forwardindustry has $10,000 to spend on as many as 3 products to enhance her business. Use the PW method to determine which of these independent investments are financially acceptable at 9% per year compounded monthly. All are expected to last 5 years. Initial Investment Revenue ($/per month) -3,000 Feature Product-1 150 Product-2 -6,500 180 Product-3 -3,100 200arrow_forward
- Dexcon Technologies, Inc., is evaluating two alternatives to produce its new plastic filament with low friction properties for creating custom bearings for 3-D printers. The estimates associated with each alternative are shown below. Using a MARR of 16% per year, which alternative has the better present worth and what is that value (select the closest value)? Method First Cost AOC, per Year Salvage Value Life DDM $170,000 $65,000 $4,000 2 years LS $350,000 $40,000 $29,000 4 years DDM with a PW--$473,000 LS with a PW --$445,900 LS with a PW --$222,055 DDM with a PW--$109,300arrow_forwardThe cost of the extending a certain road at Yellowstone National Park is $1.7 million. Resurfacing and other maintenance are expected to cost $350,000 every 3 years with an interest rate of 6% per year. a) What is the Annual Worth based capitalized cost of the road? b) How will the answer (a) change if its Salvage is expected to be $3 million at the end of its useful Life?arrow_forwardDetermine the IROR and profitability index at 12% per year for an industrial smart-grid system that has a first cost of $400,000, an AOC of $75,000 per year, estimated annual savings of $192,000, and a salvage value of 20% of its first cost after a 5-year useful life.arrow_forward
- No written by hand solution An electric switch manufacturing company is trying to decide between three different assembly methods. Method A has an estimated first cost of $30,000, an annual operating cost (AOC) of $4,000, and a service life of 2 years. Method B will cost $70,000 to buy and will have an AOC of $3,000 over its 4-year service life. Method C costs $115,000 initially with an AOC of $3,000 over its 8-year life. Methods A and B will have no salvage value, but Method C will have equipment worth 6% of its first cost.arrow_forwardTwo small engines are designed to help cleaning operation in a petrochemical company. Both seem to be very promising and we need to decide which is better or conditions to make the choice indifferent. COSTS ENGINE 1 Installation/First Costs $ 1,500,000 Operating Costs $/year Salvage Value $ Life in years ENGINE 2 2,250,000 700,000 600,000 100,000 50,000 18 8 If a MARR of 10% per year is provided, then compare Annual Worth and select: [Select] Determine the SALVAGE VALUE for Engine 2 that would make Any choice INDIFFERENT: [Select]arrow_forwardTwo machines can be used to produce a part from titanium. The costs and other cash flows associated with each alternative are estimated. The salvage values are constant regardless of when the machines are replaced. Determine which alternative(s) should be selected for further analysis if alternatives must have a payback of 5 years or less. Perform the analysis with (a) i = 0%, and (b) i = 10% per year. Machine Semiautomatic Automatic First cost, $ −40,000 −90,000 Net annual income, $ per year 10,000 15,000 Maximum life, years 10 10 Salvage value, $ 0 0arrow_forward
- A corporate jet costs $1,350,000 and will incur $200,000 per year in fixed cost (maintenance, ...) and $277 per hour variable cost (fuel, ..). The jet will be operated 1200 hours per year for 5 years and then sold for $650,000. The jet revenues $1,000 per hour. The MARR is 15% per year. Determine the Capital Recovery (CR) value of the jet.arrow_forwardThe Bureau of Public Highways is considering two possible types of road surfacing with cost estimates per kilometer as follows: Type A Type B First Cost P500k P650k Resurfacing period 8 years 12 years Resurfacing Cost P200k P250k Average annual maintenance cost P15k P20k The periodic resurfacing do not include the base of the subgrade. Compare these types by calculating the present worth for 24 year service, with no salvage value at the end of this time using interest rate of 10%. What is the Present Worth of Alternative B?arrow_forward(b) AVILA Construction Sdn Bhd plans to buy a new truck crane. There are THREE (3) alternative brands to be evaluated in terms of cost estimation as shown in Table Q1(b). Given the MARR is 18% per annum. Noted that L3D represents the Last Three Digit of student matric number. Table Q1(b): Manufacturers, lives and costs of three lined slurry pump COST ITEMS SANI SANE SANU Capital Investment RM 28,000 + (1000 x L3D) RM 49,000 + RM 84,000 (1000 x L3D) +(1000 x L3D) Annual Expenses: RM 1,500 per RM 1,000 in year RM 2,000 in year 1, 1, and increasing RM 400/yr thereafter Maintenance and increasing RM 350/yr thereafter year Useful life (years) Market Value (Disposal Cost) 8. 4 RM 10,000 RM 20,000 RM 10,000 (i) Draw cash-flow diagram for each machine. (ii) Apply the private project evaluation method to compare the annual worth, AW for each machine.arrow_forward
- 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