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2. As the 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. Alternatives A B $272,000 $346,000 28,800 19,300 6 9 $40,000 Capital investment Annual expenses" Useful life (years) Market value (at end of life) $25,000 "Excludes the cost of an operator, which is the same for both alternatives. You have selected the longest useful life (nine years) for the study period and would lease a crane for the final three years under Alternative A. On the basis of previous experience, the estimated annual leasing cost at that time will be $66,000 per year (plus the annual expenses of $28,800 per year). The MARR is 15% per year. Show that the same selection is made with d. Would leasing crane A for nine years, assuming the same costs per year as for three years, be preferred over your present selection? (E = MARR = 15%).

2. As the 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. Alternatives A B $272,000 $346,000 28,800 19,300 6 9 $40,000 Capital investment Annual expenses" Useful life (years) Market value (at end of life) $25,000 "Excludes the cost of an operator, which is the same for both alternatives. You have selected the longest useful life (nine years) for the study period and would lease a crane for the final three years under Alternative A. On the basis of previous experience, the estimated annual leasing cost at that time will be $66,000 per year (plus the annual expenses of $28,800 per year). The MARR is 15% per year. Show that the same selection is made with d. Would leasing crane A for nine years, assuming the same costs per year as for three years, be preferred over your present selection? (E = MARR = 15%).

Introductory Circuit Analysis (13th Edition)
Introductory Circuit Analysis (13th Edition)
13th Edition
ISBN:9780133923605
Author:Robert L. Boylestad
Publisher:Robert L. Boylestad
Chapter1: Introduction
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**Crane Selection Analysis** As the supervisor of a facilities engineering department, you are evaluating mobile cranes as a critical equipment acquisition. This involves assessing two potential options for a new medium-sized, truck-mounted crane. Below is a table summarizing the economic estimates for the two best alternatives: | **Alternatives** | **A** | **B** | |------------------|----------------|----------------| | **Capital investment** | $272,000 | $346,000 | | **Annual expenses**¹ | $28,800 | $19,300 | | **Useful life (years)** | 6 | 9 | | **Market value (at end of life)** | $25,000 | $40,000 | ¹ *Excludes the cost of an operator, which is the same for both alternatives.* For the study period, you have opted for the longest useful life, which is nine years, using leasing for the last three years under Alternative A. Based on previous experience, the estimated annual leasing cost after six years is projected to be $66,000 per year, with the addition of annual expenses of $28,800. The Minimum Acceptable Rate of Return (MARR) is set at 15% per annum. **Decision Point:** d. Would leasing Crane A for nine years, assuming the same costs per year as for three years, be preferable over your current choice? (Assume ε = MARR = 15%). This analysis seeks to determine the financial viability of leasing Crane A by comparing it to the current selection based on these parameters.
Transcribed Image Text:**Crane Selection Analysis** As the supervisor of a facilities engineering department, you are evaluating mobile cranes as a critical equipment acquisition. This involves assessing two potential options for a new medium-sized, truck-mounted crane. Below is a table summarizing the economic estimates for the two best alternatives: | **Alternatives** | **A** | **B** | |------------------|----------------|----------------| | **Capital investment** | $272,000 | $346,000 | | **Annual expenses**¹ | $28,800 | $19,300 | | **Useful life (years)** | 6 | 9 | | **Market value (at end of life)** | $25,000 | $40,000 | ¹ *Excludes the cost of an operator, which is the same for both alternatives.* For the study period, you have opted for the longest useful life, which is nine years, using leasing for the last three years under Alternative A. Based on previous experience, the estimated annual leasing cost after six years is projected to be $66,000 per year, with the addition of annual expenses of $28,800. The Minimum Acceptable Rate of Return (MARR) is set at 15% per annum. **Decision Point:** d. Would leasing Crane A for nine years, assuming the same costs per year as for three years, be preferable over your current choice? (Assume ε = MARR = 15%). This analysis seeks to determine the financial viability of leasing Crane A by comparing it to the current selection based on these parameters.
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