Example 6 Use the incremental analysis procedure to select the best alternative. DN is not an option. Design 1 Design 2 Design 3 Design 4 Investment $100,000 40,600 148,200 122,000 Annual Expenses $29,000 6,900 14,800 22,100 Useful Life 5 5 5 5 SV $10.000 14.000 25.600 14.000

Example 6 Use the incremental analysis procedure to select the best alternative. DN is not an option. Design 1 Design 2 Design 3 Design 4 Investment $100,000 40,600 148,200 122,000 Annual Expenses $29,000 6,900 14,800 22,100 Useful Life 5 5 5 5 SV $10.000 14.000 25.600 14.000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Two 150 horsepower motors are being considered for the company's expansion, as presented in the…

Q: Determine in how many hours each year the two motors must operate, in order to cost the two…

A: Given Data:MARR (Minimum Attractive Rate of Return) = 10% per yearOperating time: 1,000…

Q: At 20% cpd. monthly., find the capitalized cost of a bridge whose cost is P673777 with a life of 22…

A: Capitalized cost = Initial Cost + (Rehabilitation Cost-Salvage Value)/((1+i)^n-1)

Q: A new municipal refuse-collection truck can be purchased for $84,000. Its expected useful life is…

A: (Q) A new municipal refuse-collection truck can be purchased for $84,000. Its expected useful life…

Q: Required information A remotely located air sampling station can be powered by solar cells or by…

A: Annual Worth is the net worth incurred by a firm over a period of time we represent the net cost and…

Q: A young engineer is considering establishing his own company. An investment pfP500,000 will be…

A: The yearly rate of return is the % change in the value of an investment. For instance: If you assume…

Q: A city is spending $19.5 million on a new sewage system. The expected life of the system is 30…

A: It is common on very large projects to calculate the Capitalized Cost of the project. This technique…

Q: A project capitalized for P5,000,000 is expected to earn a uniform annual revenue of P1,000,000 in…

A: First Cost = P5,000,000 Annual revenue = P1,000,000 Annual O&M cost = P100,000 Annual…

Q: Nelson, Inc. is considering investing in new and more efficient equipment The equipment has 10-year…

A: Given, First cost= $800,000 Annual cost = $40,000, increases $20,000 per year Equipment life = 10…

Q: AE Criterion - Single Project* *Blank & Tarquin (2005). Engineering Economy, 7th edition. Example…

A: Calculate the initial investment:Initial investment = Cost of one system × Number of systems…

Q: Southeastern Pennsylvania Transportation Authority (SEPTA) has just opened a new route connecting…

A: Break-even point: The break-even point is when total cost and total income are equal, meaning that…

Q: The cost of an item is P200,000. Cost is P20,000 per year. What would be the capitalised cost of a…

A: Capitalized cost is the current value of future cash flows that will never end. Instances of…

Q: Calumet Electronics purchased a device for $75,000 four years ago (existing device). The company is…

A: To calculate the equivalent uniform annual cost (EUAC) of the new device, we need to consider the…

Q: It is estimated that an investment alternative with an initial investment cost of 150000 TL will…

A: MARR stands for Minimum Acceptable Rate of Return. It is the minimum rate of return that an investor…

Q: 8 units of milling machine that costs $ 267228 each are bought today. They can be used for 10 years…

A: To find the capitalized cost of the machinery we need to find out the annual worth of costs for each…

Q: You purchased a building five years ago for $100,000. Its annual maintenance expense has been $5,000…

A: Option B is correct

Q: A city is spending $20.1 million on a new sewage system. The expected life of the system is 50…

A: Capitalized cost, also known as capitalized value, is a financial concept used in the analysis of…

Q: new vending machine is being considered to purchase. The estimated first cost is php 75,000 the…

Q: A company is considering the purchase of a fleet of % ton pickup trucks for their contracting…

A: EUAC = NPV/Capital Recovery (Amortization) Factor Now, NPV =…

Q: Imagineering, Inc., is considering an investment in CAD-CAM compatible design software with the cash…

A: Future worth shows the total value of an investment or cash flow at an identified future point in…

Q: What is the capitalized worth of a project that has an indefinitely long study period and dollar…

A: Till infinity, the base amount is $500. When G is equal to $500 will be increasing each year in…

Q: An investment of 80,200 returned 20,000 per year over a five year useful life and then have a…

A: Given information Initial investment=80200 Return per year =20000 n=5 r=20% Annual cost=16500…

Q: A city is spending $20.7 million on a new sewage system. The expected life of the system is 50…

A: The capitalised cost or worth of a specific project or investment provides an approximation of the…

Q: If a manufacturer of electronic devices invests $720,000 in equipment for making compact…

A: Initial investment = $720,000Revenue received = $245,000 per yearnumber of years (n) = 10Salvage…

Q: For FW Method, if FW (i = MARR) = −30, then the project is economically _____________. justified…

A: In the financial and economy analysis, when talking about future worth, it is the analysis of the…

Q: ou are faced with a decision on an investment proposal. Specifically, the estimated additional…

A: Investment 4,00,000 Income 1,25,000 Expense 20,000 Increase @ 5% MARR 15%

Q: Part a Determine the ERR for this project. N 3 4 5 6 % $27 $27 $27 $27 $27

A: To calculate the Economic Rate of Return (ERR) for the given cash flow profile, we need to determine…

Q: A municipality is trying to decide on the purchase of a refuse collection vehicle. Two types are…

A: Given information Initial Cost Maintenance cost/year Fuel and oil cost/year Life in…

Q: A city is spending $19.5 million on a new sewage system. The expected life of the system is 40…

A: The capitalized worth of the system can be calculated using the formula for the present worth of a…

Q: How much must you deposit each year into your retirement account starting now and continuing through…

A: A deposit starting from current period goes through 10 years. The deposit takes place if $75000…

Q: Consider the following two mutually exclusive projects being considered by an agency. The agency's…

A: Project 1 Project 2 Initial Cost 14300 21500 Annual Revenue 3743 5399 PW 2363 2535

Q: If a company must choose between two projects, it should proceed with the one that generates a…

A: In capital budgeting, IRR is a tool that is used to measure the profitability of an investment.…

Q: Assume MARR-20%, and five independent projects are available with ROR values of A-22%, B-19% C-33%,…

A: Businesses often set target returns for investments in projects. MARR(minimum acceptable rate of…

Q: Westdale Manufacturing is reviewing two mutually exclusive options for new equipment with a MARR of…

A: The objective of this question is to calculate the incremental rate of return (AIRR) for two…

Q: Craig Nuts Inc. will need to invest in a new nut cracking machine. The plant engineer has gathered…

A: Given, First Cost : $250,000Annual Benefits : $73,000 in the first year and decreases by $1,200…

Q: NEV, Inc. wants to evaluate two new methods that will improve their productivity. Both alternatives…

A: The minimum acceptable rate of return (MARR) is the rate of return on a certain project that an…

Q: Your firm has purchased an injection molding machine at a cost of $100,000. The machine's useful…

A: Answer is in 2nd step:

Q: A power plant operator is considering an investment in increased efficiency of their plant that…

A: We are going to use Present value of future cash approach to answer this question.

Q: A government has decided to build a bridge. that initial cost is estimated to be 60,000,000. the…

A: Present Value refers to the value of all future or past periodic payments or the value of a lump-sum…

Q: Note: Give me both a&b right solutions. I will give good rating. An intergated, combined cycle…

A: The internal rate of come may be a monetary data point that's wont to calculate the profit of…

Q: JIH a project as PW=-700+100(A/P5%,5) then sensitivity Analysis for Initial Investment will be:…

A: Answer; The correct answer is option A ( positive )

Question

100%

The investment of design 2 is supposed to be $140600. The MARR to be used in the problem is 20%.

Example 6
Use the incremental analysis procedure to select the best alternative. DN is not an option.
Design 1 Design 2
Design 3
Design 4
Investment
$100,000 40,600
148,200
122,000
Annual Expenses $29,000
6,900
14,800
22,100
Useful Life
5
5
5
5
SV
$10,000
14,000
25,600
14,000

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: State the given information

VIEW

Step 2: Calculate using the FW method incremental analysis (D1&D2)

VIEW

Step 3: Calculate using the FW method incremental analysis (D3 and D4)

VIEW

Solution

VIEW

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

None
Find the capitalized cost at 15%interest. The initial cost for the machinery is $100000. Operating annual cost is 4000 dollar.
Find the conventional payback period for the following project: First Cost $10,000 $500 in Year 1, increasing by $200/year $3,000/year $4,000 Maintenance Income Salvage Useful Life 10 years MARR 10%
An in place machine has an equivalent annual worth of $-100000 for each year of its maximum remaining useful life of two years. A suitable replacement is determined to have equivalent annual worth values of $-175000, $-125000, and $-150000 per year if kept for 1,2, or 3 years, respectively. When should the company replace the machine, if it uses a fixed 3-year planning horizon? Use an interest rate of 17.255609824% per year compounded semiannualy.
Company X is considering the purchase of a helicopter for connecting services between their base airport and the new inter-county airport being built about 30 miles away. It is believed that the chopper will be needed only for 6 years until the Rapid Transit Connection is phased in. The estimates on two types of helicopters under consideration, The Whirl 2 B and The ROT 8, are given below: The Whirl 2 B First Cost Annual Maintenance Salvage Value Useful life in years $95,000 $3,000 $12,000 The ROT 8 $120,000 $9,000 $25,000 6 3 Assuming that the Whirl 2B will be available in the future with identical costs, what is the annual cost advantage of selecting The Whirl 2B ? (Use an interest rate of 10 %) A. cost more than $4,000 C. cost between $4,000 and $3,000 B. save between $3,000 and $2000 D. save more than $4,000
Answer part A Answer part B
• Smalltown, PA currently has a $38,000/year contract with a private company to transport students to their school and back. Smalltown can buy a bus for $40,000 that will be adequate for the next 5 years. Operating and maintenance costs are estimated to be $25,000 per year. At the end of 5 years, the bus will have an estimated salvage value of $5,000. Their MARR is 10%/year. а. What is the Excel or closed form equation (along with the value of relevant parameters) to determine this investment's internal rate of return?
A $45,000 investment in a new conveyor system is projected to improve throughput and increasing revenue by $14,000 per year for five years The conveyor will have an estimated market value of $4,000 at the end of five years. Using an MARR = 12% per year, what is the FW? $-19,329.40 $13,635.70 $16,998.90 none of the above K ?
A project has an initial cost of $150,000. The annual operating cost is $8000 for the first 10 years and $5000 thereafter. There is a recurring $15000 maintenance cost each 15 years. The equation that represents the capitalized cost of this project at i=10% is: CW(10%) =150,000+8,000(P/A, 10 %, 10)+(5000/0.1) (P/F, 10%, 11 ) + (15000 (A/F, 10%, 15))/0.1 CW(10%) - 150,000+8,000(P/A, 10 %, 10) +(5000/0.1) (P/F, 10%, 10 ) + ( 15000(A/F, 10%, 15))/0.1 O CW(10%) =150,000+8,000(P/A, 10 %, 10) + (5000 / 0.1) ( P/F, 10%, 11) +15000(A/F, 10%, 15) O CW(10%) =150,000+8,000(P/A, 10 %, 10) +(5000/0.1) (P/F, 10% , 9) +(15000(A/F, 10%, 15))/0.1