1. A company intends to replace equipment that is no longer able to meet its needs. The two best alternatives are to purchase a manual tool (A1) or an automatic tool (A2). The estimated economic consequences of the two alternatives are: A1 A2 Initial investment ($) 28.000 65.000 Annual withdrawal ($) 14.000 9.000 Additional withdrawal every 5 years ($) 14.000 9.000 Lifespan (years) 10 20 Residual value ($) 8.000 13.000 Based on the present worth analysis, with an interest rate of 15% per year, an analysis period of 20 years, and the assumption of recurrence, determine the best alternative that must be chosen using future worth analysis.

1. A company intends to replace equipment that is no longer able to meet its needs. The two best alternatives are to purchase a manual tool (A1) or an automatic tool (A2). The estimated economic consequences of the two alternatives are: A1 A2 Initial investment ($) 28.000 65.000 Annual withdrawal ($) 14.000 9.000 Additional withdrawal every 5 years ($) 14.000 9.000 Lifespan (years) 10 20 Residual value ($) 8.000 13.000 Based on the present worth analysis, with an interest rate of 15% per year, an analysis period of 20 years, and the assumption of recurrence, determine the best alternative that must be chosen using future worth analysis.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. A company intends to replace equipment that is no longer
able to meet its needs. The two best alternatives are
to purchase a manual tool (A1) or an automatic tool (A2).
The estimated economic consequences of the two alternatives
are:
A1
A2
Initial investment ($)
28.000
65.000
Annual withdrawal ($)
14.000
9.000
Additional withdrawal every 5 years ($)
14.000
9.000
Lifespan (years)
10
20
Residual value ($)
8.000
13.000
Based on the present worth analysis, with an interest rate of 15% per year,
an analysis period of 20 years, and the assumption of recurrence, determine the
best alternative that must be chosen using future worth analysis.

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