Engineering Economy
16th Edition
ISBN: 9780133582819
Author: Sullivan
Publisher: DGTL BNCOM
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 35P
To determine
Calculate the annual worth.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Decision D6, which has three possible choices (X, Y, or Z), must be made in year 3 of a 6-year study period in order to maximize EPW).
Using an MARR of 16% per year, the investment required in year 3, and the estimated cash flows for years 4 through 6,
determine which decision should be made in year 3.
High
Low
High
Y
D6
Low
High
Low
Investment, Cash Flow, (Year Cash Flow, $1000
3)
Cash Flow, $1000
(Year 6)
Cash Flow,
Outcome
Year 3
(Year 4)
$1000 (Year 5)
Probability
3
High (X)
$-190,000
$50
$50
$50
0.58
$40
Low (X)
High (Y)
Low (Y)
High (Z)
Low (Z)
$30
$40
$30
$170
$-30
$20
$50
$30
$150
$-30
0.42
$-54,000
$30
$30
$190
$-30
0.45
0.55
$-240,000
0.7
0.3
The present worth of X is $ [
The present worth of Y is $
The present worth of Z is $
Select decision branch Y
As supervisor of a facilities engineering department, you consider mobile cranes to be critical equipment. The purchase of a new, medium-sized truck-mounted crane is being evaluated. The economic estimates for the two best alternatives are shown in the following table. MARR is at 15% per year. You can use the assumption of repeatability in this case.
Show that the same selection is made for the following methods:a. RORAI method
b. AWC method
c. PW method
TRUE OR FALSE:
If there is a past estimation error, there is a need to replace the property immediately.
The physical life is always greater than all the other “life” factors under replacement analysis.
If breakeven analysis is conducted with PW analysis for different MEAs, it doesn’t guarantee that the fastestalternative to reach its breakeven point has also the highest equivalent worth.
Chapter 6 Solutions
Engineering Economy
Ch. 6 - Prob. 1PCh. 6 - The Consolidated Oil Company must install...Ch. 6 - Prob. 3PCh. 6 - Three mutually exclusive design alternatives are...Ch. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Fiesta Foundry is considering a new furnace that...Ch. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - Consider the following cash flows for two mutually...
Ch. 6 - Prob. 11PCh. 6 - Prob. 12PCh. 6 - The alternatives for an engineering project to...Ch. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Refer to the situation in Problem 6-16. Most...Ch. 6 - Prob. 18PCh. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - Prob. 23PCh. 6 - Prob. 24PCh. 6 - Prob. 25PCh. 6 - In the Rawhide Company (a leather products...Ch. 6 - Refer to Problem 6-2. Solve this problem using the...Ch. 6 - Prob. 28PCh. 6 - Prob. 29PCh. 6 - Prob. 30PCh. 6 - Prob. 31PCh. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Potable water is in short supply in many...Ch. 6 - Prob. 35PCh. 6 - Prob. 36PCh. 6 - In the design of a special-use structure, two...Ch. 6 - Prob. 38PCh. 6 - a. Compare the probable part cost from Machine A...Ch. 6 - Prob. 40PCh. 6 - Two mutually exclusive alternatives are being...Ch. 6 - Prob. 42PCh. 6 - IBM is considering an environmentally conscious...Ch. 6 - Three mutually exclusive earth-moving pieces of...Ch. 6 - A piece of production equipment is to be replaced...Ch. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 51PCh. 6 - Prob. 52PCh. 6 - Prob. 53PCh. 6 - Prob. 54PCh. 6 - Prob. 55PCh. 6 - Prob. 56PCh. 6 - Prob. 57PCh. 6 - Prob. 58PCh. 6 - Prob. 59PCh. 6 - Prob. 60PCh. 6 - Prob. 61PCh. 6 - Prob. 62PCh. 6 - Prob. 63PCh. 6 - Prob. 64PCh. 6 - Prob. 65PCh. 6 - Prob. 66PCh. 6 - Three models of baseball bats will be manufactured...Ch. 6 - Refer to Example 6-3. Re-evaluate the recommended...Ch. 6 - Prob. 69SECh. 6 - Prob. 70SECh. 6 - Prob. 71SECh. 6 - Prob. 72CSCh. 6 - Prob. 73CSCh. 6 - Prob. 74CSCh. 6 - Prob. 75FECh. 6 - Prob. 76FECh. 6 - Prob. 77FECh. 6 - Complete the following analysis of cost...Ch. 6 - Prob. 79FECh. 6 - For the following table, assume a MARR of 10% per...Ch. 6 - Prob. 81FECh. 6 - Problems 6-82 through 6-85. (6.4) Table P6-82 Data...Ch. 6 - Prob. 83FECh. 6 - Problems 6-82 through 6-85. (6.4) Table P6-82 Data...Ch. 6 - Problems 6-82 through 6-85. (6.4) Table P6-82 Data...Ch. 6 - Consider the mutually exclusive alternatives given...Ch. 6 - Prob. 87FE
Knowledge Booster
Similar questions
- BREAK-EVEN ANALYSIS Consider a hybrid vehicle with a price of $30,000. This vehicle will average 30 miles per gallon of gasoline. A comparably equipped gasoline-only vehicle will cost $28,000 and will average 25 miles per gallon of gasoline. Assuming an interest rate of 3% per year and a study period of five years, find the breakeven cost of gasoline ($/gal) if the vehicle will be driven 18,000 miles each year.arrow_forwardJ. Doe must choose between two different models. The analysis period considered is 6 years. Model 1 has a life of four years with a first cost of $13,500 and maintenance costs of $1,250 per year in years 2, 3, and 4 (no maintenance costs in year 1). The salvage value for this model at the end of its life is $4,271 (For year 2 the salvage value is $7,594). Model 2 has a life of three years with a first cost of $15,000 and maintenance costs of $700 per year. Its salvage value at the end of its life is $9,300 (year 3). Which of the two models should be chosen by J. Doe if considering a MARR of 12%.arrow_forwardTony works for ABC Window Products. While performing an analysis for a new window product, Tony found a report from last year that provided the following information regarding the manufacture of a similar product: annual production rate = 40,000 units; selling price = P70 per unit; fixed production cost = P240,000 per year; variable production cost = P1,700,000 per year; variable selling expenses = P96,000 per year. What is the breakeven production rate per year of the company? Blank 1 unitsarrow_forward
- industry 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_forwardA 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_forwardCtrl 24 Calculate the perpetual equivalent annual cost (years 1 through infinity) of $5 million in year 0, $2 million in year 10, and $100,000 in years 11 through infinity. Use an interest rate of 10% per year. 27 A new bridge across the Allegheny River in Pittsburgh is expected to be permanent and will have an initial cost of $30 million. This bridge must be resurfaced every 5 years at a cost of $1 million.arrow_forward
- WHICH IS MORE ECONOMICAL? USE METHOD OF COMPARISON OF ALTERNATIVES! In a cold storage plant, it is desired to determine whether to use insulation two inches thick or three inches thick in insulating the walls of the cold storage ware house. Heat absorb through the walls without insulation would cost P96.00 per year per squaremeter. A two-inch insulation will cost P30.40 per square meter and will cut out 89% of the loss. A three-inch insulation will cut out 92% of the loss and will cost P65.00 per square meter. Using a life 15 years for the insulation with no salvage value and a minimum attractive return of 8%, what thickness of insulation should be used?arrow_forwardEvaluate a combined cycle power plant on the basis of the Present Worth Method (PW) when MARR is 12 % per year.Pertinent cost data are as follows: (Power Plant (thousands of $) Investment Cost: $12693 Useful life: 15 ears Market Value (EOY 15) $3,000 Annual Operating expenses: $1,000 Overhaul cost-end of 5th year: $1897 Overhaul cost-end of 10th year. $1819arrow_forwardA building is adding 27,000 square feet to their existing structure. The costs include a construction cost of $40/ square foot. Annual costs include a fixed cost of $60,000 and variable costs of $3 per square foot per year. The market value is expected to be 33% of construction costs at the end of 20 years. Find the capital recovery cost if the MARR is 4%.arrow_forward
- Two 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_forwardBased on company records of similar equipment, a consulting aerospace engineer at Aerospatiale estimated AW values for a presently owned, highly accurate steel rivet inserter as shown. A challenger has ESL = 2 years and AWC= $−41,300 per year. The MARR is 12% per year. If Retained ThisNumber of Years The AW Value Is,$ per Year 1 −62,000 2 −51,000 3 −49,000 4 −53,000 5 −70,000 When should the next replacement evaluation take place, and under what assumption? The next replacement evaluation should take place in (Click to select) 4 2 3 5 years, and under the assumption that the (Click to select) defender challenger estimates do not change.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_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:PEARSON
Engineering 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 Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial 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