An engineer must decide between two ways to pump concrete to the top of a seven-story building. Plan 1 requires the leasing of equipment for $60,000 initially and will cost between $0.40 and $0.95 per metric ton to operate, with a most likely cost of $0.50 per metric ton. The pumper can pump 100 metric tons per 8-hour day. If leased, the asset will have a contract period of 5 years. Plan 2 is a rental option that will cost $18,000 per year. In addition, an extra $16.5 per hour labor cost will be incurred for operating the rented equipment per 8-hour day. Which plan should the engineer recommend if the equipment will be needed for 75 days per year? The MARR is 11% per year. The annual worth of plan 1 lease optimistic is $ The annual worth of plan 1 most likely is $ The annual worth of plan 1 pessimistic is $ The annual worth of plan 2 rental is $ Plan 1 lease optimistic is better Plan 1 most likely is better Plan 1 lease pessimistic is better ✓than rental of plan 2. ✓than rental of plan 2. than rental of plan 2.

An engineer must decide between two ways to pump concrete to the top of a seven-story building. Plan 1 requires the leasing of equipment for $60,000 initially and will cost between $0.40 and $0.95 per metric ton to operate, with a most likely cost of $0.50 per metric ton. The pumper can pump 100 metric tons per 8-hour day. If leased, the asset will have a contract period of 5 years. Plan 2 is a rental option that will cost $18,000 per year. In addition, an extra $16.5 per hour labor cost will be incurred for operating the rented equipment per 8-hour day. Which plan should the engineer recommend if the equipment will be needed for 75 days per year? The MARR is 11% per year. The annual worth of plan 1 lease optimistic is $ The annual worth of plan 1 most likely is $ The annual worth of plan 1 pessimistic is $ The annual worth of plan 2 rental is $ Plan 1 lease optimistic is better Plan 1 most likely is better Plan 1 lease pessimistic is better ✓than rental of plan 2. ✓than rental of plan 2. than rental of plan 2.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

An engineer must decide between two ways to pump concrete to the top of a seven-story building. Plan 1 requires the leasing of
equipment for $60,000 initially and will cost between $0.40 and $0.95 per metric ton to operate, with a most likely cost of $0.50 per
metric ton. The pumper can pump 100 metric tons per 8-hour day. If leased, the asset will have a contract period of 5 years. Plan 2 is a
rental option that will cost $18,000 per year. In addition, an extra $16.5 per hour labor cost will be incurred for operating the rented
equipment per 8-hour day. Which plan should the engineer recommend if the equipment will be needed for 75 days per year? The
MARR is 11% per year.
The annual worth of plan 1 lease optimistic is $
The annual worth of plan 1 most likely is $
The annual worth of plan 1 pessimistic is $
The annual worth of plan 2 rental is $
Plan 1 lease optimistic is better
Plan 1 most likely is better
Plan 1 lease pessimistic is better
✓than rental of plan 2.
than rental of plan 2.
than rental of plan 2.

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