Answered: Design A: movable shelves adaptable…

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

UPS Freight plans to spend $100 million on new long-haul tractor-trailers. Some of these vehicles will include a new shelving design with adjustable shelves to transport irregularly sized freight that requires special handling during loading and unloading. Though the life is relatively short, the director wants a capitalized cost analysis performed on the two final designs. Compare the alternatives at the MARR of 10% per year using (a) tabulated factors, and (b) a spreadsheet.

Design A:
movable shelves adaptable frames
Design B:
First cost, $
-2,500,000
- 1,100,000
AOC, $ per year
- 130,000
-65,000
Annual revenue,
$ per year
800,000
625,000
Salvage value, $
50,000
20,000
Life, years
4

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