ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Chapter 6, Problem 36P
To determine
To recommend: the option to be chosen using annual worth comparison.
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A manufacturing company is proposing two new methods to enhance and increase the
production line of the company. Method A is expected to cost $1000 while method B is
expected to cost $2400. The maintenance cost of the production line will increase to $800
per year if method A is applied and $650 per year with method B, which one of the two
proposed methods is more economical based on a future worth analysis at an interest rate
of 10% per year? Assume a 15-year life for the production line.
For a new product, the marketing department predicts that sales are expected to be 100,000 units in year 1, increasing by 15,000 each subsequent year to 175,000 in year 6. There are 2 different manufacturing process available:
Option A: A manufacturing machine with up-front equipment purchase cost of $150,000 and the manufacturing cost per unit is $0.70. At the end of 6 years, the equipment salvage recovery is $20,000.
Option B: A machine with up-front purchase cost of $200,000 with a manufacturing cost of $0.50 per unit, and equipment salvage recovery at the end of 6 years of $40,000.
Assume an interest rate of 5% and a production period of 6 years.
Which option should you choose based on a present equivalent evaluation with no considerations for depreciation?
1. What is the present equivalent cost of Option A?
2. What is the present equivalent cost of Option B?
Please do not give solution in image formate thanku.
Biomet Implants is planning new online patient diagnostics for surgeons while they operate. The new system will cost $300,000 to install in an operating room, $5000 annually for maintenance, and have an expected life of 10 years. The revenue per system is estimated to be $80,000 in year 1 and to increase by $10,000 per year through year 10.
a) Determine NPV to see if the project is economically justified using PW analysis and an MARR of 10% per year.
b) Insert a Triangle distribution with minimum at $8000, average 10,000 and maximum at 12000 as the input distribution for the revenue increase. Perform Monte Carlo Simulation and discuss the results.
Chapter 6 Solutions
ENGR.ECONOMIC ANALYSIS
Ch. 6 - Prob. 1QTCCh. 6 - Prob. 2QTCCh. 6 - Prob. 3QTCCh. 6 - Prob. 4QTCCh. 6 - Prob. 5QTCCh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5P
Ch. 6 - Prob. 6PCh. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Prob. 17PCh. 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 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Prob. 28PCh. 6 - Prob. 29PCh. 6 - Prob. 30PCh. 6 - Prob. 31PCh. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Prob. 34PCh. 6 - Prob. 35PCh. 6 - Prob. 36PCh. 6 - Prob. 37PCh. 6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42PCh. 6 - Prob. 43PCh. 6 - Prob. 44PCh. 6 - Prob. 45PCh. 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 - Prob. 67PCh. 6 - Prob. 68PCh. 6 - Prob. 69PCh. 6 - Prob. 70PCh. 6 - Prob. 71PCh. 6 - Prob. 72PCh. 6 - Prob. 73PCh. 6 - Prob. 74PCh. 6 - Prob. 75PCh. 6 - Prob. 76PCh. 6 - Prob. 77P
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