The B&E Cooling Technology Company, a maker of automobile air conditioners, faces an impending deadline to phase out the traditional chilling technique, which ich uses chlorofluorocarbon (CFCS), a family of refrigerant chemicals believed to attack the earth's protective ozone layer. B&E has been pursuing other means of cooling and refrigeration. As a near-term solution, its engineers recommend a cooling technology known as absorption chiller, which uses plain water as a refrigerant and semiconductors that cool down when charged with electricity. The company plans to retrofit the plant now to adopt the absorption chiller and continuing to be a market leader in cooling technology. B&E is considering three options: The financial data for the three options are as follows: Item Initial investment System life Salvage value Annual revenue Annual operations and maintenance costs Option 1 $6 Million 8 years $1 Million $9 Million $6 Million If B&E's MARR is 15% and using equivalent annual worth method, compute the ffg (Round off answer to whole number): Option 2 $8 Million 8 years $2 Million $10.5 Million $8 Million Option 3 $5 Million 8 years $2 Million $11 Million $7.5 Million

The B&E Cooling Technology Company, a maker of automobile air conditioners, faces an impending deadline to phase out the traditional chilling technique, which ich uses chlorofluorocarbon (CFCS), a family of refrigerant chemicals believed to attack the earth's protective ozone layer. B&E has been pursuing other means of cooling and refrigeration. As a near-term solution, its engineers recommend a cooling technology known as absorption chiller, which uses plain water as a refrigerant and semiconductors that cool down when charged with electricity. The company plans to retrofit the plant now to adopt the absorption chiller and continuing to be a market leader in cooling technology. B&E is considering three options: The financial data for the three options are as follows: Item Initial investment System life Salvage value Annual revenue Annual operations and maintenance costs Option 1 $6 Million 8 years $1 Million $9 Million $6 Million If B&E's MARR is 15% and using equivalent annual worth method, compute the ffg (Round off answer to whole number): Option 2 $8 Million 8 years $2 Million $10.5 Million $8 Million Option 3 $5 Million 8 years $2 Million $11 Million $7.5 Million

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: lucing their own headsets in-house. The company estimates that the transition will take place over…

A: Economic worth is the worth that individual puts on a monetary decent in view of the advantage that…

Q: Ruth Brennan is evaluating two options. The first option is to open her own legal practice. Based on…

A: Given, The total revenue earned by Ruth Brennan from business = $320,000 Cost of purchases -…

Q: A piece of construction equipment for a contractor costs $45,000 to purchase.Fuel, oil, grease and…

A: The annual cost of owning, operating, and maintaining an asset over its full lifespan is referred to…

Q: Gethsemane Products Inc. is the leading manufacturer of cooking oil in the market. To cater to the…

A: Repeatability Assumption is made while comparing alternatives with different useful lives . What we…

Q: Delaware Chemicals is considering the installation of a computer process con- trol system in one of…

A: Techniques for capital planning can be divided into two categories: (1) non-discounted cash flow…

Q: Ocean water contains 0.9 ounce of gold per ton. Method A costs $230 per ton of water processes and…

A: Given information:Ocean water contains 0.9 ounces of gold per ton.Method A costs $230 per ton of…

Q: WorldTrans is considering a project that has an up-front cost at t = 0 of $2,700. (All dollars in…

A: It is clearly mentioned that WorldTrans will not undertake the project in 1 years’ time if the NPV…

Q: A local U.S. Postal Service office is considering purchasing a 4,000 lb forklift truck, which will…

A: All expenses related to the day-to-day operation and administration of a business are included in…

Q: A nationwide real estate corporation is considering adding a new service line to sell the house of a…

A: Time period is denoted by ‘n’ and NAAR is denoted by ‘i’. The present worth (PW) for option…

Q: (USE PW

A: The present worth is a financial metric used to evaluate the value of cash flows over time. It…

Q: For the five alternatives described in the table on right (note: the third column is ROR of each…

A: According to the question, it is given that :

Q: Vandelay Industries is considering the purchase of a new machine for the production of latex.…

A: The net present value is the difference between the PV of all cash flows and the initial…

Q: Weller Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data…

A: Step 1: Determine the Budgeted Cost of Goods SoldThe budgeted sales are given, and the cost of goods…

Q: Lockheed Martin is considering purchasing a new fine pitch machine to speed up the process in…

A: The internal rate of return (IRR) is a measure of the percentage return on investment. To determine…

Q: At the BlueFin Bank corporate headquarters, management was discussing the potential of outsourcing…

A: Costs refers to the expenses that incur in the process of production of goods or services. There are…

Q: You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that…

A: Cash flow refers to the amount of cash or cash equivalents that flows in and out of a business…

Q: aton Medical Services is evaluating 10 independent indivisible projects, all with positive NPV. The…

A: ProjectCostNPVA1,061,191122,737B561,75858,102C1,647,849280,660D1,026,02089,365E191,87017,568F1,333,6…

Q: The relevant CCA rate for the capital expenditures is 15%. Assume assets are never sold. a. For this…

A: Net present value or NPV can be defined as the capital budgeting tool that is used to make a…

Q: National Chemical Company manufactures a chemical compound that is sold for $58 per gallon. A new…

A: This situation involves a sale or other action.In the event of a sale and subsequent processing,…

Q: You are considering two types of automobiles. Model A costs $18,000, andModel B costs…

A: Table 1 shows the initial purchase price and sales price of model A and model B automobiles…

Q: Calculate the Net Present Value of this project according to Team #1. (Let's call it the "base-case…

A: This question is about calculating the Net Present Value (NPV) of a project. The NPV is a measure…

Q: Hectorivas Biotech is considering buying a very small biotechnology research firm that develops…

A: To solve this problem, we need to calculate the minimum and maximum purchase prices for the small…

Question

The B&E Cooling Technology Company, a maker of automobile air conditioners, faces an impending deadline to phase out the traditional chilling technique, which uses chlorofluorocarbon (CFCs), a family of
refrigerant chemicals believed to attack the earth's protective ozone layer. B&E has been pursuing other means of cooling and refrigeration. As a near-term solution, its engineers recommend a cooling technology
known as absorption chiller, which uses plain water as a refrigerant and semiconductors that cool down when charged with electricity. The company plans to retrofit the plant now to adopt the absorption chiller and
continuing to be a market leader in cooling technology. B&E is considering three options:
The financial data for the three options are as follows:
Item
Initial investment
System life
Salvage value
Annual revenue
Annual operations and maintenance costs
Option 1
$6 Million
8 years
$1 Million
$9 Million
$6 Million
If B&E's MARR is 15% and using equivalent annual worth method, compute the ffg (Round off answer to whole number):
Option 2
$8 Million
8 years
$2 Million
$10.5 Million
$8 Million
Option 3
$5 Million
8 years
$2 Million
$11 Million
$7.5 Million

If B&E's MARR is 15% and using equivalent annual worth method, compute the ffg (Round off answer to whole number):
A) Present Worth
Option 1
Option 2
Option 3
B) Annual worth
Option 1
Option 2
Option 3
C) Future Worth
Option 1
Option 2
Option 3
D) Which option is the better choice?

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

Step 2

Step 3

Step 4

Step 5

Step 6

Step by step

Solved in 6 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

Boxer Production, Inc., is in the process of considering a flexible manufacturing system that will help the company react more swiftly to customer needs. The controller, Mick Morrell, estimated that the system will have a 10-year life and a required return of 10% with a net present value of negative $500,000. Nevertheless, he acknowledges that he did not quantify the potential sales increases that might result from this improvement on the issue of on-time delivery, because it was too difficult to quantify. If there is a general agreement that qualitative factors may offer an additional net cash flow of $150,000 per year, how should Boxer proceed with this Investment?
Big Rock Brewery currently rents a bottling machine for $54,000 per year, including all maintenance expenses. The company is considering purchasing a machine K instead and is comparing two alternate options: option a is to purchase the machine it is currently renting for $165,000, which will require $22,000 per year in ongoing maintenance expenses, or option b, which is to purchase a new, more advanced machine for $250,000, which will require $19,000 per year in ongoing maintenance expenses and will lower bottling costs by $11,000 per year. Also, $40,000 will be spent upfront in training the new operators of the machine. Suppose the appropriate discount rate is 8% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the rental of the machine. Assume also that the machines are subject to a CCA rate of 25% and there will be a negligible salvage value in 10 years' time (the end of each machine's life). The marginal corporate…
QUESTION 2 The city council of a fast growing city in the west of Canada is planning to construct a new tunnel to help improve the traffic flow in the city. Construction is to start in 2020 and is expected to last for four years at a cost of $16 million per year. After construction is completed, the regular cost of operation and maintenance is expected at $1 million for the first year, increasing by $80,000 per year thereafter. To help the city recover the construction cost, the tunnel will operate for the first 25 years as a toll way (till end of 2048). Expected return from toll fees is estimated at $8 million per year. Consider the present to be the end of 2018/beginning of 2019, the service life of the project to be till end of year 2058, and the interest rate to be 6%. a) Draw a cash flow diagram for this project. b) What is the Present Worth of the project? (7 Marks) c) What is the Annual Worth of the project from 2018 till 2058? (Hint: make use of the PW calculated in part b)).…
The Federal Reserve will lose money as a lender of last resort if: Select one: O a. financial institutions fail to pay back their loans. O b. the output gap becomes positive. consumers complain about the use of taxpayer money. O C. O d. the economy improves.
The port of Brisbane has built one additional loading/storage facility on its docks, and it is negotiating with two potential interested parties. Only one of them will get the facility. TransShip also has the option of buying space in the port of Melbourne instead, which costs $30,000 per month and incurs an extra $10,000 per month in transportation costs, as goods from Asia have further to go. CargoHaul can also buy from Brisbane, or it can use its existing facilities elsewhere more intensively, which would cost $15,000 per month in overtime and would lead to an additional loss of $10,000 per month in damaged goods, because of crowding. The port of Brisbane has no other use for the facility. 1. Who gets the facility? 2. If this is core bargaining, what is the highest payment that the port of Brisbane could receive? 3. If this is core bargaining, what is the lowest payment that the port of Brisbane could receive?
The gaming commission is introducing a new lottery game called Infinite Progresso. The winner of the Infinite Progresso jackpot will receive $600 at the end of January, $1,600 at the end of February, $2,600 at the end of March, and so on up to $11,600 at the end of December. At the beginning of the next year, the sequence repeats starting at $600 in January and ending at $11,600 in December. This annual sequence of payments repeats indefinitely. If the gaming commission expects to sell a minimum of 1,150,000 tickets, what is the minimum price they can charge for the tickets to break even, assuming the commission earns 3.00% /per/year/month on its investments and there is exactly one winning ticket?
The city council of a fast growing city in the west of Canada is planning to construct a new tunnel to help improve the traffic flow in the city. Construction is to start in 2020 and is expected to last for four years at a cost of $16 million per year. After construction is completed, the regular cost of operation and maintenance is expected at $1 million for the first year, increasing by $80,000 per year thereafter. To help the city recover the construction cost, the tunnel will operate for the first 25 years as a toll way (till end of 2048). Expected return from toll fees is estimated at $8 million per year. Consider the present to be the end of 2018/beginning of 2019, the service life of the project to be till end of year 2058, and the interest rate to be 6%. a) Draw a cash flow diagram for this project. What is the Present Worth of the project? b) c) What is the Annual Worth of the project from 2018 till 2058? (Hint: make use of the PW calculated in part b)). d) Is it a good…
The Logan Well Services Group is considering two sites for storage and recovery of reclaimed water. The mountain site (MS) will use injection wells that cost $4.2 million to develop and $280,000 per year for M&O. This site will be able to accommodate 150 million gallons per year. The valley site (VS) will involve recharge basins that cost $11 million to construct and $400,000 per year to operate and maintain. At this site, 720 million gallons can be injected each year. If the value of the injected water is $3.00 per thousand gallons, which alternative, if either, should be selected according to the B/C ratio method? Use an interest rate of 8% per year and a 20-year study period. The B/C ratio is . Select alternative (Click to select) neither of the alternatives mountain site valley site .
APL has an overall cost of capital of 11.6 percent and a beta of 1.31. The firm is contemplating a new project that is unrelated to the firm's current operations. SKL is a firm that operates similarly to the new project and SKL has a cost of capital of 10.7 percent. APL knows that it will be less efficient than SKL and thus feels that an adjustment of +1 percent should be added to the project's discount rate to allow for this inefficiency. What discount rate should be assigned to the new project? A. 10.7 percent B. 11.3 percent C. 11.7 percent D. 11.6 percent E. 12.6 percent
The gaming commission is introducing a new lottery game called Infinite Progresso. The winner of the Infinite Progresso jackpot will receive $900 at the end of January, $1,800 at the end of February, $2,700 at the end of March, and so on up to $10,800 at the end of December. At the beginning of the next year, the sequence repeats starting at $900 in January and ending at $10,800 in December. This annual sequence of payments repeats indefinitely. If the gaming commission expects to sell a minimum of 1,200,000 tickets, what is the minimum price they can charge for the tickets to break even, assuming the commission earns 9.00 % / year on its investments and there is exactly one winning ticket? $ Do all calculations to 5 decimal places and round final answer to 2 decimal places. Tolerance is +$0.03.
Consider a proposal to enhance production of tortillas en a taqueria. The new machine is estimated to cost $20 million and will incur an additional $1 million per year in maintenance costs. The machine will produce annual savings of $7 million each year. The Minimum acceptable rate of return (MARR) is 10% per year, and the study period is five years at which time the machine will be obsolete (worthless). What is the maximum (minimum) percentage of maintenance cost can change that reverse your decision? (write upto 4 decimals.)
Century Foods, a producer of frozen meat products, is considering a new plant near Essen, Germany, for its sausage rolls and frozen meat pies. The company has estimates of production costs and selling prices in the first year. It expects the real value of operating costs per unit to fall because of improved operating methods. It also expects competitive pressures to cause the real value of product prices to fall. The following data are available. Answer parts (a) through (d). Century Food Plant Data Output price in 2021 (€/unit) 21 Operating cost in 2021 (€/unit) 16.5 Planned output rate (boxes/year) Fall in real output price 279,000 1.5% per year Fall in real operating cost per box First cost in 2020 (€) 1% per year 7,300,000 10 years Study period Current euro MARR before tax 20% a. Assume there is zero inflation. What is the present worth, in 2020, of the project? Use a spreadsheet to find the present worth. The present worth of the project under the assumption of zero inflation is €