Problem 3Two options are being analyzed using a break even analysis based on net present worth with aMARR of 6%.Option A:Initial Cost: $150,000Annual 0&M: $14,000 per yearAdditional maintenance cost at year 11: $26,000Annual Revenue: $32,000 per yearSalvage Value: $21,000Life Span = 20 yearsOption B:Initial Cost: $65,000Annual 0&M: $12,000Annual Revenue: $29,000Salvage Value: $19,000Life Span = 10 yearsDetermine the following:a. The most cost effective solution.b. For the least cost effective solution, the minimum required annual revenue to make thesolution viable.

To answer the above questions we perform annual worth analysis based on the present value of the…

Problem 3 Two options are being analyzed using a break even analysis based on net present worth with a MARR of 6%. Option A: Initial Cost: $150,000 Annual 0&M: $14,000 per year Additional maintenance cost at year 11: $26,000 Annual Revenue: $32,000 per year Salvage Value: $21,000 Life Span = 20 years %3D

Problem 3 Two options are being analyzed using a break even analysis based on net present worth with a MARR of 6%. Option A: Initial Cost: $150,000 Annual 0&M: $14,000 per year Additional maintenance cost at year 11: $26,000 Annual Revenue: $32,000 per year Salvage Value: $21,000 Life Span = 20 years %3D

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

Problem 3
Two options are being analyzed using a break even analysis based on net present worth with a
MARR of 6%.
Option A:
Initial Cost: $150,000
Annual 0&M: $14,000 per year
Additional maintenance cost at year 11: $26,000
Annual Revenue: $32,000 per year
Salvage Value: $21,000
Life Span = 20 years
Option B:
Initial Cost: $65,000
Annual 0&M: $12,000
Annual Revenue: $29,000
Salvage Value: $19,000
Life Span = 10 years
Determine the following:
a. The most cost effective solution.
b. For the least cost effective solution, the minimum required annual revenue to make the
solution viable.

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