Pearson eText for Engineering Economy -- Instant Access (Pearson+)
Pearson eText for Engineering Economy -- Instant Access (Pearson+)
17th Edition
ISBN: 9780137533138
Author: William Sullivan, Elin Wicks
Publisher: PEARSON+
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Chapter 8, Problem 31P
To determine

Calculate the equivalent annual worth.

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A company has invested in machinery that $23,000 to purchase and install and the company purchased a 3 year warranty for $5,000. The warranty covers all maintenance and repairs for three years with no cost to the company. At year 4, the maintenance costs are estimated at $2,000 and will increase by $1,200 per year after that. Operating costs are expected to be $800 every year. The machinery will last nine years. If the interest rate is 6%, what is the machinery's economic life that minimizes the EUAC?
The heat loss through the exterior walls of a certain manufacturing plant is estimated to cost $29000 at EOY 1. ABC Insulation, Inc., told the owner of the plant that the heat loss can be reduced by 80% if he is willing to spend $401,000 to install its innovative insulation material. The cost of heat loss is expected to rise by $2100 per year (uniform gradient) after the next year. The owner plans to keep the present building for 15 more years. Assume MARR (minimum acceptable rate of return) is 4% per year. (a) What is the present equivalent value of the cost savings in the reduction of heat loss for these 15 years? Round off your final answer to nearest thousand. (b) Using AW method, would you recommend the owner to install ABC's new insulation material? Why?
Milwaukee Machine Tool is planning to buy a machine for S15,000 with a salvage value of 20% of the initial cost after a life of 10 years. The company estimates it will need $900 for supplies, $250 for maintenance, $100 for utilities and S1,500 for overhead. They estimate these will increase by S1200, 8%, 10% and $200 respectively over the 10-year machine life. If interest rate is 5% per year, what is the net present value of the project? -$78,301.03 2 -$82,216.08 3 -$93,301.03 -$52,216.08
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