City engineers are considering two plans for municipal aqueduct tunnels. They are to decide between the two using an interest rate of 8 percent. Plan A is a full-capacity tunnel that will meet the needs of the city forever. Its cost is $3 000 000 now and $100 000 every 10 years for lining repairs. Plan B involves building a half-capacity tunnel now and a second half-capacity tun- nel in 20 years, when the extra capacity will be needed. Each of the half-capacity tunnels costs $2 000 000. Maintenance costs for each tunnel are $80 000 is also an additional $15 000 per tunnel per year required to pay for extra pumping costs caused by greater friction in the smaller tunnels. (a) Which alternative is preferred? Use a present worth comparison. (b) Which alternative is preferred? Use an annual worth comparison. every 10 years. There

City engineers are considering two plans for municipal aqueduct tunnels. They are to decide between the two using an interest rate of 8 percent. Plan A is a full-capacity tunnel that will meet the needs of the city forever. Its cost is $3 000 000 now and $100 000 every 10 years for lining repairs. Plan B involves building a half-capacity tunnel now and a second half-capacity tun- nel in 20 years, when the extra capacity will be needed. Each of the half-capacity tunnels costs $2 000 000. Maintenance costs for each tunnel are $80 000 is also an additional $15 000 per tunnel per year required to pay for extra pumping costs caused by greater friction in the smaller tunnels. (a) Which alternative is preferred? Use a present worth comparison. (b) Which alternative is preferred? Use an annual worth comparison. every 10 years. There

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Eddie’s Precision Machine Shop is insured for $700,000. The present yearly insurance premium is $1.00 per $100 of coverage. A sprinkler system with an estimated life of 20 years and no salvage value can be installed for $20,000. Annual maintenance costs for the sprinkler system are $400. Ifthe sprinkler system is installed, the system must be included in the shop’svalue for insurance purposes but the insurance premium will reduce to $0.40 per $100 of coverage. Eddie uses a MARR of 15%/yr. Solve, a. What is the internal rate of return of this investment? b. What is the decision rule for judging the attractiveness of investments based on internal rate of return? c. Is the sprinkler system economically justified?
The city of St. John's is intalling a new swimming pool in the east end recreation centre. One design being considered is a reinforced concrete pool that will cost $5,400,000 to install. Thereafter, the inner surface of the pool will need to be refinished and painted every 5 years at a cost of $440,000 per refinishing. Assuming that the pool will have essentially an infinite life, what is the present worth of the costs associated with the pool design? The city uses a MARR of 10%. If the installation costs, refinishing costs, and MARR are subject to 5% or 10% increases or decreases, how is the present worth affected? (NOTE: Text answers are case sensitive and every field in this question is worth equal value) All calculations are performed using 4 significant figures. (a) Complete the table below: Sensitivity Analysis Calculated Values Parameter Construction Costs Refinishing Costs MARR [%] -10% -5% Base Case 5,400,000 440,000 10 +5% +10%
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A company is considering two machines. Machine X has a first cost of $30,000, AOC of $18.000, and 5 of $7000 after 4 years. Mact will cost $50,000 with an AOC of $16,000 and 5 of $9000 after 6 years. The AW equations for Machine X and Y at 12% interest rate Select one: O a AWX=-30,000(A/P12 % .4) -18,000 7,000(A/F.12%.4); AWY- 50,000(A/P12 %6) -16.000 9.000(A/F.12%,6) O b. AWX=-30,000(A/P12%24) -18,000 7,000(A/F.12%24) AWY- -50,000(A/P12%24)-16.000 9.000(A/F12%24) Oc AWX=-30.000(A/P12 % 6 ) -18,000 7,000(A/F.12%6) AWY 50.000(A/P12% 6)-16.000 9,000(A/F.12%,6) Od AWX-30,000(A/P12% 12)-18.000 7.000(A/F.12% 121 AWY- 50.000(A/P12% 12)-16,000 9,000(A/F.12%,12) .
Six mutually exclusive projects A, B, C, D, E, and F, are being considered by ABC Inc. They all have 20 years of project life and have been ordered by first costs so that project A has the lowest first cost, project F the largest. Specifically, detailed cash flows for Projects A is given below. Project A: Initial Cost of $630,000. annual benefit of $70,000 for 20 years The table below apply to all projects (A through F). The data can be interpreted as follows: the IRR on the incremental investment from project C to D is 11.8%. Which project should be chosen using MARR of 12%? IRR on IRR on Increments of Investment Project overall Compared With Project Investment A В C D E A ? B 11.80% 12.1% 12.50% 13.0% 12.2% 12.30% 12.2% 12.1% 11.8% 7% 9% E 11.00% 14% 11.5% 9.8% 11.20% 10% 11.2% 9.7% 8.50% O Project B O Project C O Project D O Project E O Project F
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If money is worth 10.334%, determine the following: A.)Present worth of concrete piping system. B.)Present worth of cast iron piping system. C.)Most economical piping system. Justify your answer in your solution. (Please provide detailed solution not in excel, I'm in rush I will guarantee you to vote it up for your effort thank you.)
An old, heavily used warehouse currently has an incandescent lighting system. The lights run essentially 24 hr / d * a * y , 365days / y * r and draw about 10 kW of power. Consideration is be ing given to replacing these lights with fluorescent lights to save on electricity. It is estimated that the same level of lighting can be achieved with 4.5 kW of fluorescent lights. Re placement of the lights will cost about $11,000. Bulb replacement and other maintenance are not expected to be significantly different. Electricity for the lights currently costs \$0.045/kWh . The warehouse is scheduled for de molition in five years to make way for a more modern facility . The company has a MARR of 15%. Should the company replace the incandescent lights with fluorescent lights? State any assumptions you make.
A consulting engineer has been hired to advise a town how best to proceed with theconstruction of a 200,000-m3 water supply reservoir. Since only 120,000 m3 of storagewill be required for the next 25 years, an alternative to building the full capacity now isto build the reservoir in two stages. Initially, the reservoir could be built with 120,000 m3of capacity and then, 25 years hence, the additional 80,000 m3 of capacity could beadded by increasing the height of the reservoir. If interest is computed at 4%, whichconstruction plan is preferred? Detail your steps in excel.
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