A company is considering the following two alternatives: Alt. 1 $42,500 6,000 18,500 12,000 1.5 years Alt. 2 S70,000 4,000 20,000 25,000 3 years First cost Annual maintenance Annual savings Salvage value Useful life If interest is 20% per year, which alternative is preferred?

A company is considering the following two alternatives: Alt. 1 $42,500 6,000 18,500 12,000 1.5 years Alt. 2 S70,000 4,000 20,000 25,000 3 years First cost Annual maintenance Annual savings Salvage value Useful life If interest is 20% per year, which alternative is preferred?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5
Calculate the future worth (FW) at 10% of a project that will save $25K per year for 20 years. The first cost is $120K, and the salvage value is $20K. Compare this with the PW and the EAW. (Please show the process and solution ty.)
K Consider the following EOY cash flows for two mutually exclusive alternatives (one must be chosen). The MARR is 4% per year. Capital investment Annual expenses Useful life Market value at end of useful life The PW of the Lead Acid is $ The PW of the Lithium Ion is $ Click the icon to view the interest and annuity table for discrete compounding when i = 4% per year. (a) Determine which alternative should be selected based on the PW method. Assume repeatability and use a study period of 18 years. Lead Acid Lead Acid $7,000 $2,250 6 years $0 Lithium Ion Lithium Ion $13,000 $2,300 9 years $2,600 Which alternative should be selected? Choose the correct answer below. The AW of the Lead Acid is $ The AW of the Lithium lon is $ Lead Acid Lithium Ion (Round to the nearest dollar.) (Round to the nearest dollar.) (b) Determine which alternative should be selected based on the AW method, also assuming repeatability. . (Round to the nearest dollar.) (Round to the nearest dollar.) Which…
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(2) If the initial investment on the equipment is 25000 and it will have a salvage value of 5000 at the end of 5 years. It will save 8000 per year for the study period. Is it worthwhile to install the equipment? Justify it by using Future Worth (FW) formulation when MARR is 20%
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12.9 A three-year maintenance contract for a local computer network costs $4000. The network is expected to be needed for fifteen years and the maintenance contract will be purchased for the same price at the beginning of every three year period. If the interest rate is 6%, the present equivalent cost of the maintenance contract is nearest: (A) $12,950 (B) $14,500 (C) $15,400 (D) $16,000
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