Royal Aviation Corporation is considering purchasing a piece of equipment to manufacturewing fixtures for an aircraft. The cost of the system is $5,000,000 with a life expectancy of 10years and no salvage value. The annual operating cost of the system is $400,000 and a revenuestream of $1,500,000 at the end of each year is expected for life. Using AW analysis andassuming a MARR of 10%, is this investment economically justified?No, with AW= -$3,900,000No, with AW= -$286,250Yes, with AW = $686,250Yes, with AW= $286,250

The objective of the question is to determine whether the investment in the equipment is…

Answered: Royal Aviation Corporation 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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A 50-kilowatt gas turbine has an investment cost of $35,000. It costs another $15,000 for shipping, insurance, site preparation, fuel lines, and fuel storage tanks. The operation and maintenance expense for this turbine is $500 per year. Additionally, the hourly fuel expense for running the turbine is $7.00 per hour, and the turbine is expected to operate 3,500 hours each year. The cost of dismantling and disposing of the turbine at the end of its 6-year life is $9,000. a. If the MARR is 16% per year, what is the annual equivalent life-cycle cost of the gas turbine? b. What percent of annual life-cycle cost is related to fuel? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 16% per year. a. The annual equivalent life-cycle cost of the gas turbine is $ (Round to the nearest dollar.)
Super Tennis Co is in the business of designing and manufacturing running shoes for long distance runners. They are considering a $500 million upgrade to their production line for the iPhone/iPad/ iWatch connected shoe that has Bluetooth connectivity. The potential cash flow is estimated at net revenues of $460 million per year for four years. Recently, they were advised of potential patent infringement and to eliminate this problem they are considering buying a license. YezzCo will sell a license that is good for four years of exclusive use of the patent and associated intellectual property. Super Tennis Co uses a corporate MARR of 14% and their risk-free alternatives are 6%. The VP of Engineering at Super Tennis Co estimates market volatility in demand is 40%. The VP of Marketing estimates market volatility in demand at 35%. 1.Since the VPAc€?cs trust you, they asked you to figure out the most they should pay for a license from YezzCo. 2. Super Tennis Co is known to be liberal in…
A special-purpose 30-horsepower electric motor has an efficiency of 90%. Its purchase and installation price is $2,200. A second 30-horsepower high-efficiency motor can be purchased for $3,200, and its efficiency is 93%. Either motor will be operated 4,000 hours per year at full load, and electricity costs $0.10 per kilowatt-hour (kWh). MARR = 15% per year, and neither motor will have a market value at the end of the eight-year study period. Solve, a. Which motor should be chosen? b. For an incremental investment of $1,000 in the more efficient motor, what is the PW of the energy savings over the eight-year period?
An economic evaluation of the following mutually exclusive alternatives is being conducted. Since they have different service lives, repeatability is assumed and an analysis period of 18 years is used. The MARR is 10%. Initial cost Annual revenues Service life (years) Alternative A $30,000 $25,000 6 Alternative B $100,000 $40,000 9 Answer the following two questions: (1) The net AW of Alternative B over the analysis period is (select the closest value) A. $15,614 B. $27,807 C. $22,636 D. $57,364 (2) The net PW of Alternative B over the analysis period is (select the closest value) A. $228,056 B. $185,647 C. $130,361 D. $128,056
Problem 6 A sensitivity analysis is performed for a facility with a MARR of 6%. The facility has an initial investment of $550,000 and the project has a life span of 15 years. A constant annual loan payment of $45,000 is required over the life span. Annual operation and maintenance costs are expected to be $95,000 per year that increase $10,000 per year. An additional expected maintenance cost of $126,000 is expected at year 10. Annual revenue is expected to be $152,000 per year that increases $15,000 per year. At the end of the life span, the salvage value is expected to be $1,250,000. Worst Case: Based on future projections, the annual operations and maintenance costs are expected to be $95,000 for the first year and increase $15,000 per year. Additional expenses for maintenance are expected to be $45,000 at year 5 and $65,000 at year 10. Annual expected revenue is expected to be $143,000 that increases $12,000 per year. At the end of the life span, the salvage value is expected to…

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