CON E 330 Hw 8
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San Diego State University *
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Course
330
Subject
Industrial Engineering
Date
Apr 24, 2024
Type
docx
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7
Uploaded by KidSeaUrchinMaster1267
Payback Period and Exact Methods:
Chapter 9 Problem 9-51) All the alternatives have no salvage value. If the MARR is 10%, which alternative should be selected? (a) Solve the problem by
payback period. (b) Solve the problem by future worth analysis. (c) Solve the problem by benefit–cost ratio analysis. (d) If the answers in parts (a), (b), and
(c) differ, explain why this is the case.
Decision Trees: Chapter 10 problem 10-41: The tree in Figure P10-41 has probabilities after each chance node and PW values for each terminal node. What decision should be made? What is the expected value
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Problem 10-43: A factory building is located in an area subject to occasional flooding by a 10-43 nearby river. You have been brought in as a consultant to
determine whether flood-proofing of the building is economically justified. The alternatives are as follows: A. Do nothing. Damage in a moderate flood is
$10,000 and in a severe flood, $25,000. B. Alter the factory building at a cost
of $15,000 to withstand moderate flooding without damage and to withstand
severe flooding with $10,000 damages. C. Alter the factory building at a cost of $20,000 to withstand a severe flood without damage. In any year the probability of flooding is as follows: 0.70, no flooding of the river; 0.20, moderate flooding; and 0.10, severe flooding. If interest is 15% and a 15-
year analysis period is used, what do you recommend?
(10-43)
Depreciation Schedules:
Chapter 11 Problem 11-11: A $5 million oil drilling rig has a 5-year depreciable life and a $250,000 salvage value at the end of that time. (a) Determine which one of the following methods provides the preferred depreciation schedule: 100% bonus depreciation or MACRS. (b) Show the depreciation schedule for the preferred method. (c) Search for new oil rig technologies and describe three that improve environmental impact.
A)
The MACRS(Modified Accelerated Cost Recovery System) provides the preferred depreciation schedule compared to the 100% bonus depreciation method. In 100 bonus depreciation method, the business is allowed to deduct 100% of the cost of the property in addition to other depreciation. It may lead to a loss of the business due to excess statements. The MACRS begins with a Declining Balance Method and then switches to Straight Line, thus the cost of the asset is depreciated
over the lifetime, which is generally the basic point of depreciation.
B)
C)
The three new oil rig technologies that improve environmental impact
(i)
Horizontal Drilling: Its objective is to target oil or gas reservoirs intersecting at each point with a horizontal inclination, also maintenance is
easy for this.
(ii)
Subsea Mudlift Drilling: In this method, mud is not needed in the riser to control the well, it allows drillers to detect more quickly and appropriately
react to downhole pressure charges enhancing safety and thereby reducing environmental impact.
(iii)
Shale gas development and operations: Horizontal drilling and hydraulic fracturing combined is the new wave. Using horizontal drilling and use of water to fracture the rock releases the gas which in turn creates wells expected to produce for 30 to 40 years.
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Chapter 11 Problem 11-17) Consider a $6500 piece of machinery, with a 5-
year depreciable life and an estimated $1200 salvage value. The projected utilization of the machinery when it was purchased, and its actual production
to date, are as follows: Year Projected Production (tons) Actual Production (tons) 1 3500 3000 2 4000 5000 3 4500 [Not 4 5000 yet 5 5500 known] Compute the depreciation schedule using: (a) Straight line (b) Double declining balance (c) 100% bonus depreciation (d) MACRS (e) Unit of production (for first 2 years only)