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

Similar questions

You are considering making an $80,000 investment in a process improvement project. Revenues are expected to grow from $50,000 in 1 year by $30,000 each year for the next four years ($50,000 first Year, $80,000 second year, $110,000 third year and so forth) while cost are expected to increase from $20,000 in year 1 by $10,000 each year. If there is no salvage value at the end of five years. at MARR of 11%, What is the NFW of the investment?
Gold Shaban company is planning to expand its operation in the food andbeverage industries and considering three options for its requirements as presented below: Option 1: Capital = BD390,000 with annual revenue of BD69,000 Option 2: Capital = BD920,000 with annual revenue of BD167,000 %3D Option 3: Capital = BD660,000 with annual revenue of BD133,500 The study period is 10 years and the expected MARR is 10% per year. Which ofthe option should be selected? O a. Option 2 since it has a greater value of PW = BD130,304 as compared to the other two options. O b. Option 3 since it has a greater value of PW = BD160,304 as compared to the other two options. O c. Option 1 since it has a greater value of PW = BD170,000 as compared to the other two options. d. Option 2 since it has a greater value of PW = BD200,304 as compared to the other two options.
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)).…
Two installations are being considered to provide for water storage in a chemical plant. A tank on a tower or a tank of equal capacity placed on a hill some distance from the plant. The cost of installing the tank and tower is estimated at P350,000. The cost of installing the tank on the hill, including the extra length of service lines, is estimated at P300,000. The hill installation will require an additional investment of P30,000 in pumping equipment whose life is estimated to be 15 years with a salvage value of P2,500. The life of the two installations is estimated to be 30 years. Annual cost of labor, electricity, and maintenance incident to the pumping equipment is estimated at P3,000. Taxes and insurance for both are 2.5% of the first cost. Money is worth 18% effective. Which alternative should be used? (USE PW and EUAC)
The City of Manila contemplates to increase the capacity of its existing water transmission line. Two plans are under consideration. Plan A requires the construction of a parallel pipe line, the flow being maintained by gravity. The initial cost is P2,750,000 and the life is 40 years, with an annual operating cost of P50,000. Plan B requires the construction of a booster pumping station costing P1,050,000 with a life of 40 years. The pumping equipment costs an additional amount of P250,000. It has a life of 20 years and a salvage value of P25,000. The annual operating cost is P165,000. If the interest rate is 12%, which is the more economical plan and by how much lower than the other? Plan B lower than Plan A by P115,906.57 Plan B higher than Plan A by P15,906.57 Plan A higher than Plan B by P15,906.57 Plan A lower than Plan B by P115,906.57
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 .