A firm is considering two alternatives that have no salvage value.Alternative AAlternative BInitial cost$9000$4700Uniform annual benefits$1860$1650Useful life10 years5 yearsAt the end of five years, a replacement Alternative B may be purchased with the same cost,benefits, and life.a) Graph the EUAW for the alternatives for interest rates from 0% to 100%. Thenconstruct a choice table for interest rates from 0% to 100%.b) If the MARR is 15%, which alternative should be selected?

Answered: A firm is considering two alternatives…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Year иршNHO 1 2 3 4 5 6.O E - $90 20 20 20 20 20 20 F - $110 35 35 35 35 0 0 G - $100 0 10 20 30 40 50 H - $120 0 0 0 0 0 180 (a) Based on the payback period, which alternative is preferred? (b) Based on future worth analysis, which of the four alternatives is preferred at 5% interest? (c) Based on future worth analysis, which alternative is preferred at 20% interest? (d) At 10% interest, what is the benefit-cost ratio for Alt. G?
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Req#2: Use Aw analysis to find the best alternative for your company starting one of the following projects. Your company MARR is 9.1 %. Draw the cashflow diagram. Projects data First cost, $ Annual cost, $/year Annual revenue, $/year Life, years Project-1 -85,000 -23, 100 54,000 5 I Project-2 -135,000 -11,000 55, 100 10 Project-3 -77,000 -21, 100 37, 100 5 Project-4 -90,000 -26, 100 47, 100 5
9-83 Assume a cost improvement project has only a first cost of $100,000 and a monthly net savings, M. There is no salvage value. Graph the project's IRR for payback periods from 6 months to the project's life of N years. The firm accepts projects with a 2- year payback period or a 20% IRR. When are these standards consistent and when are they not? (a) Assume that N = 3 years. (b) Assume that N = 5 years. (c) Assume that N = 10 10 years. (d) What recommendation do you have for the firm about its project acceptance criteria?
9- Two alternatives with identical benefits are being considered: AB $500 $800 150 Initial cost Uniform annual cost 200 Useful life, in years 8 8 (a) Compute the payback period if Alt. B is purchased rather than Alt. 4. (b) Use a MARR of 10% and benefit-cost ratio analysis to identify the alternative that should be selected.
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8- The life of a project is 10 years. An equipment is needed for this project. Two alternatives are available. Equipment A has an initial cost of $5000.00, an annual maintenance cost of $300.00, and a salvage value of $800.00 after 5 years. Equipment B has an initial cost of $7000.00, an annual maintenance cost of $400.00, lasts for 10 years and has no salvage value. If the interest rate is 6%: a) Equipment A should be purchased. b) Equipment B should be purchased. c) No equipment should be purchased. d) There is no difference in choosing between A or B.
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Q#2 Graph the EUAC or EUAB of the following two mutually exclusive alternatives. Use interest rate from 0% to 100% Initial cost Annual Cost HP Dell 6800 16,999 1500 1800 Annual Benefits 4000 5500 Salvage Value Useful Life in years 1000 35000 4 8
Given the following: Alt. A Alt. B Alt. C Initial Cost $25,000 $40,000 $32,000 Benefits Year 1 5000 2000 6000 Year 2 5500 9000 6000 Year 3 6000 8000 6000 Year 4 6500 7000 6000 Year 5 7200 6000 7000 Salvage Value 4000 8000 6500 MARR 8% Find the best alternative using uniform annual cash flow analysis.
Multiple Alternatives 8-12 Consider the following alternatives: Initial cost $300 $600 $200 35 981 Uniform annual benefits 41 Each alternative has a 10-year useful life and no salvage value. (a) Construct a choice table for interest rates from 0% to 100%. (b) If the MARR is 8%, which alternative should be selected?
The cash flows for the following four alternatives are given below. You may assume the benefits occur throughout the year rather than just at the end of the year. Based upon payback period, the alternative that should be selected is given by the following option: Year A B C D 0 -$1000 -$900 -$950 -$2783 1 200 100 350 1200 2 200 200 350 1200 3 1200 300 350 1200 4 1200 300 350 1200 5 1200 700 350 1200 Group of answer choices B C A Select none D

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