A city water and waste-water department has a six-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an additional four years, or it can be sold now for $27,000 and replaced by a new pump. The purchase price of the replacement pump is $49,500. The projected MVs and operating and maintenance costs over the four-year planning horizon are shown in the table that follows. Assuming the MARR is 15%, (a) determine the economic life of the challenger and (b) determine when the defender should be replaced. Defender Challenger Year MV at EOY O&M Costs 1 $23,000 $25,000 Marginal Cost $33,050 MV at EOY O&M Costs EUAC $34,625 $11,500 $34,950 2 19,500 27,000 33,950 26,125 13,500 31,343 3 4 16,000 12,500 29,000 35,425 17,625 15,500 30,357 31,000 36,900 9.125 17,500 30,014 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 15% per year. a. The economic life of the challenger is year(s). (Round to the nearest whole number.) b. The defender should be OA. kept for at least one more year More Info OB. replaced now Amount Present Factor Worth Factor To Find F To Find P Given P Given F Discrete Compounding; -15% Single Payment Compound Compound Amount Factor To Find F Given A Uniform Series Present Sinking Fund Factor Worth Factor To Find P To Find A Given F Capital Recovery Factor To Find A Given P Given A N FIP PIF FIA PIA AIF AIP 1.1500 0.8696 1.0000 0.8696 1.0000 1.1500 2 1.3225 0.7561 2.1500 1.6257 0.4651 0.6151 3 1.5209 0.6575 3.4725 2.2832 0.2880 0.4380 4 1.7490 0.5718 4.9934 2.8550 0.2003 0.3503 5 2.0114 0.4972 6.7424 3.3522 0.1483 0.2983 Print Done - X Clear all Check answer
A city water and waste-water department has a six-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an additional four years, or it can be sold now for $27,000 and replaced by a new pump. The purchase price of the replacement pump is $49,500. The projected MVs and operating and maintenance costs over the four-year planning horizon are shown in the table that follows. Assuming the MARR is 15%, (a) determine the economic life of the challenger and (b) determine when the defender should be replaced. Defender Challenger Year MV at EOY O&M Costs 1 $23,000 $25,000 Marginal Cost $33,050 MV at EOY O&M Costs EUAC $34,625 $11,500 $34,950 2 19,500 27,000 33,950 26,125 13,500 31,343 3 4 16,000 12,500 29,000 35,425 17,625 15,500 30,357 31,000 36,900 9.125 17,500 30,014 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 15% per year. a. The economic life of the challenger is year(s). (Round to the nearest whole number.) b. The defender should be OA. kept for at least one more year More Info OB. replaced now Amount Present Factor Worth Factor To Find F To Find P Given P Given F Discrete Compounding; -15% Single Payment Compound Compound Amount Factor To Find F Given A Uniform Series Present Sinking Fund Factor Worth Factor To Find P To Find A Given F Capital Recovery Factor To Find A Given P Given A N FIP PIF FIA PIA AIF AIP 1.1500 0.8696 1.0000 0.8696 1.0000 1.1500 2 1.3225 0.7561 2.1500 1.6257 0.4651 0.6151 3 1.5209 0.6575 3.4725 2.2832 0.2880 0.4380 4 1.7490 0.5718 4.9934 2.8550 0.2003 0.3503 5 2.0114 0.4972 6.7424 3.3522 0.1483 0.2983 Print Done - X Clear all Check answer
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 2E
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Transcribed Image Text:A city water and waste-water department has a six-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an additional four years, or it can be sold now for $27,000 and replaced by a new pump. The purchase price of the replacement
pump is $49,500. The projected MVs and operating and maintenance costs over the four-year planning horizon are shown in the table that follows. Assuming the MARR is 15%, (a) determine the economic life of the challenger and (b) determine when the defender should be
replaced.
Defender
Challenger
Year
MV at EOY
O&M Costs
1
$23,000
$25,000
Marginal Cost
$33,050
MV at EOY
O&M Costs
EUAC
$34,625
$11,500
$34,950
2
19,500
27,000
33,950
26,125
13,500
31,343
3
4
16,000
12,500
29,000
35,425
17,625
15,500
30,357
31,000
36,900
9.125
17,500
30,014
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 15% per year.
a. The economic life of the challenger is year(s). (Round to the nearest whole number.)
b. The defender should be
OA. kept for at least one more year
More Info
OB. replaced now
Amount
Present
Factor
Worth Factor
To Find F
To Find P
Given P
Given F
Discrete Compounding; -15%
Single Payment
Compound
Compound
Amount
Factor
To Find F
Given A
Uniform Series
Present
Sinking
Fund
Factor
Worth Factor
To Find P
To Find A
Given F
Capital
Recovery
Factor
To Find A
Given P
Given A
N
FIP
PIF
FIA
PIA
AIF
AIP
1.1500
0.8696
1.0000
0.8696
1.0000
1.1500
2
1.3225
0.7561
2.1500
1.6257
0.4651
0.6151
3
1.5209
0.6575
3.4725
2.2832
0.2880
0.4380
4
1.7490
0.5718
4.9934
2.8550
0.2003
0.3503
5
2.0114
0.4972
6.7424
3.3522
0.1483
0.2983
Print
Done
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