5. Fred, a city politician is advocating for a new dock and pier system along the river to boost local commerce. A committee appointed by the mayor, who opposes Fred, has prepared the following estimates: Input Variable Base Case Initial building cost $6,000,000 Initial equipment cost $1,500,000 Annual benefits $3,000,000 Annual O&M cost $ 1,500,000 With a MARR of 6% and a project life of 10 years, perform a sensitivity analysis on the data using PW as the assessment metric. For each input, consider deviation of -10%, -5%, 0%, 5%, 10% from the base case. a. For each deviation of each input, calculate PW and show the result as a table similar to table 12.2 shown below. b. Show the sensitivity graph c. Which input has the biggest input on the PW?
5. Fred, a city politician is advocating for a new dock and pier system along the river to boost local commerce. A committee appointed by the mayor, who opposes Fred, has prepared the following estimates: Input Variable Base Case Initial building cost $6,000,000 Initial equipment cost $1,500,000 Annual benefits $3,000,000 Annual O&M cost $ 1,500,000 With a MARR of 6% and a project life of 10 years, perform a sensitivity analysis on the data using PW as the assessment metric. For each input, consider deviation of -10%, -5%, 0%, 5%, 10% from the base case. a. For each deviation of each input, calculate PW and show the result as a table similar to table 12.2 shown below. b. Show the sensitivity graph c. Which input has the biggest input on the PW?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:5. Fred, a city politician is advocating for a new dock and pier system along the river to boost local commerce. A
committee appointed by the mayor, who opposes Fred, has prepared the following estimates: Input Variable Base Case
Initial building cost $6,000,000 Initial equipment cost $1,500,000 Annual benefits $3,000,000 Annual O&M cost $
1,500,000 With a MARR of 6% and a project life of 10 years, perform a sensitivity analysis on the data using PW as the
assessment metric. For each input, consider deviation of -10%, -5%, 0%, 5%, 10% from the base case. a. For each
deviation of each input, calculate PW and show the result as a table similar to table 12.2 shown below. b. Show the
sensitivity graph c. Which input has the biggest input on the PW?
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