Potable water is in short supply in manycountries. To address this need, two mutuallyexclusive water purification systems are being consideredfor implementation in China. Doing nothing is not anoption. Refer to the data below and state your keyassumptions in working this problemSystem 1 System 2Capital investmentAnnual revenues$150,000 s70,000$100,00050,00022,00020,000Annual expenses40,000MV at end of useful life0.Useful life5 years10 yearsIRR16.5%15.1%a. Use the PW method to determine which system shouldbe selected when MARR = 8% per year.b. Which system should be selected when MARR 15%per year?%3D

cation systems are being con n China. Doing nothing is e data below and state yc ng this problem System 1 System $150,0 $100,000 50,000 22,000 nt 70,00 40,00 20,000 5 years 16.5% ful life 10 yea 15.1% d to determine which system MARR = 8% per year. %3D ıld be selected when MARR

cation systems are being con n China. Doing nothing is e data below and state yc ng this problem System 1 System $150,0 $100,000 50,000 22,000 nt 70,00 40,00 20,000 5 years 16.5% ful life 10 yea 15.1% d to determine which system MARR = 8% per year. %3D ıld be selected when MARR

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

Potable water is in short supply in many
countries. To address this need, two mutually
exclusive water purification systems are being considered
for implementation in China. Doing nothing is not an
option. Refer to the data below and state your key
assumptions in working this problem
System 1 System 2
Capital investment
Annual revenues
$150,000 s
70,000
$100,000
50,000
22,000
20,000
Annual expenses
40,000
MV at end of useful life
0.
Useful life
5 years
10 years
IRR
16.5%
15.1%
a. Use the PW method to determine which system should
be selected when MARR = 8% per year.
b. Which system should be selected when MARR 15%
per year?
%3D

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