Q1 - With these new estimates, What is the AW of the Investment and Salvage value for YORK AC unit?Q2 - With these new estimates, What is the FW of the Investment and Salvage value for YORK AC unit? Mohamad, owner of an residential furnished apartment's in Dubai, performed an economic analysis 4 years ago when he decided to place an new eefficient central AC unit for eachapartments instead of old split units windows type in each room. The estimates used and the annual worth analysis at MARR = 12% are summarized below. Two differentAC brands were compared.LGYorkCost and installation, $Annual maintenance cost, $ per year -800Salvage value, $Electrical power savings, $ per year 25,000 35,000Useful life, years-26,000 -36,000-3002,0003,000710The spreadsheet in below sheet is the one Mohamad used to make the decision. York was the clear choice due to its substantially larger AW value, hence York AC units wereinstalled.MARR12%LGYorkAnnualRepairsavingsRepairmaintenance savingsInvestmentInvestmentAnnualand salvageand salvage0$26,000Yearsmaintenance$0$800$0$36,000$0$0$25,000$25,000$300$3001 $0$0$35,0002 $0-$800$0$35,0003 $0$800$35,000$25,000$25,000$0$3004 $0$800$0$300$35,000$35,0005 $06 $0$25,000$25,000$25,000$800$0$300-$800$0-$300$35,0007$2,000$800$0$35,000$35,000$35,0008$0-$3009$0|$30010$3,000$300$35,000AW element$6,068$800$25,000|$7,025$300$35,000Total AW$18,701.17$28,499.52During a quick review (year 4 of operation), it was obvious that the maintenance costs and repair savings have not followed (and will not follow) the estimates made 4 years ago. Infact, the maintenance contract cost is going from $300 this year (year 4) to $1200 per vear next year and will then increase 7% per year for the next 6 years. Also, the electricalpower savings for the last 4 years were $31,312 (year 1), $27,565 ( year 2), $30,493( year3), and $32,903( year4), as best as Mohamad can determine. He believes savings willdecrease by $3,349 per year hereafter. Finally, these 4-year-old AC units are worth nothing on the market now, so the salvage is zero, not $3000.

Given information Product : York AC Initial cost=$36000 First 3 years annual maintenance cost= $300…

Answered: Q1 - With these new estimates, What is…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q1 - With these new estimates, What is the AW of the Investment and Salvage value for YORK AC unit? Q2 - With these new estimates, What is the FW of the Investment and Salvage value for YORK AC unit?