Contemporary Engineering Economics Plus MyLab Engineering with eText -- Access Card Package (6th Edition)
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Chapter 6, Problem 32P
To determine

Calculate the cost per mile.

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Two options are available for painting your house: (1) Oil-based painting, which costs $5,000, and (2) water-based painting, which costs $3,000. The estimated lives are 10 years and 5 years, respectively. For either option, no salvage value will remain at the end of the respective service lives. Assume that you will keep and maintain the house for 10 years. If your personal interest rate is 10% per year, which of the following statements is correct?(a) On an annual basis, Option 1 will cost about $850(b) On an annual basis, Option 2 is about $22 less than Option 1(c) On an annual basis, both options cost about the same( d) On an annual basis, Option 2 will cost about $820.
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Two 150-horsepower (HP) motors are being considered for installation at amunicipal sewage treatment plant. The first costs $4,500 and has an operating efficiency of 83%. The second costs $3,600 and has an operating efficiency of 80%. Both motors are projected to have zero salvage value after a life of 10 years. All the annual charges, such as insurance and maintenance, amount to a total of 15% of the original cost of each motor. If power cost is a flat 5 cents per kilowatt-hour, which alternative should be chosen at 5,000 operating hours per year? Assume an interest rate of 6%. (A conversion factor you might find useful is IHP = 746watts = .746kilowatts.)
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