The following data applies for example problems 8.1 through 8.3. A company isconsidering the purchase of either machine A or machine B.machine Amachine Binitial cost$80,00020 years$20,000$18,000 per year$100,00025 years$25,000$15,000 per year for the first 15 years$20,000 per year for the next 10 yearsestimated lifesalvage valueother costsThe interest rate is 10%, and all cash flows may be treated as end-of-year cashflows. Assume that equivalent annual cost is the value of the constant annuityequal to the total cost of a project. The equivalent annual cost of machine B ismost nearly(A) $21,000(B) $21,500(C) $23,000(D) $26,500

Equivalent annual cost measures the annual cost of operating and maintaining any assets, for the…

The following data applies for example problems 8.1 through 8.3. A company is considering the purchase of either machine A or machine B. nitial cost estimated life salvage value machine A $80,000 20 years $20,000 $18,000 per year machine B $100,000 25 years $25,000 $15,000 per year for the first 15 years $20,000 per year for the next 10 years other costs The interest rate is 10%, and all cash flows may be treated as end-of-year cash lows. Assume that equivalent annual cost is the value of the constant annuity equal to the total cost of a project. The equivalent annual cost of machine B is most nearly (A) $21,000

The following data applies for example problems 8.1 through 8.3. A company is considering the purchase of either machine A or machine B. nitial cost estimated life salvage value machine A $80,000 20 years $20,000 $18,000 per year machine B $100,000 25 years $25,000 $15,000 per year for the first 15 years $20,000 per year for the next 10 years other costs The interest rate is 10%, and all cash flows may be treated as end-of-year cash lows. Assume that equivalent annual cost is the value of the constant annuity equal to the total cost of a project. The equivalent annual cost of machine B is most nearly (A) $21,000

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 3 An engineer has received two bids for an elevator to be installed in a new building. The bids, plus his evaluation of the elevators, are as follows: Bid Alternative Westinghome Itis $45,000 $54,000 Service life (year) 10 15 Engineer's evaluation Annual operating cost $2,700 $2,850 Salvage value $3,000 $4,500 If the interest rate is 10%, using the net present value method, which bid should be accepted?
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A pump has an initial cost of $20,000 and an annual maintenance cost of $550. The life of the pump is 15 years, and its salvage value is $4500. Assuming an annual effective interest rate of 4%, the equivalent uniform annual cost of the pump is most nearly? a. $1020 b. $1470 c. $2120 d. $2570
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Question 5 Cost data of a machine is shown in the following table with an annual rate of 12%. Calculate annual worth at end of year 2. M&O cost Retention Yr. Market Value per year O (First Cost) 55,000 35,000 45.000 20,000 47,500 3 15,000 50,000 2,000 53,500 O 63,256 O 69.289 O 68,476 O 67,854 Question 6 Use same cost data from last question and 12% annual rate of return. Calculate annual worth at end of Year 3. O 65,765 O 64,332 O 67,428 O 66.256 Question 7 Use the same cost data of the machine from the above 2 questions and 12% interest rate per year. What is the ESL of this machine? O 1 O 2 O 3 O 4
Question 5 Cost data of a machine is shown in the following table with an annual rate of 12%. Calculate annual worth at end of year 2 M&O cost Retention Yr. Market Value per year O First Cost) 55,000 1 35,000 45.000 2 20,000 47.500 3 15,000 50.000 4 2.000 53.500 O 6a256 O 69209 O R476 O 67.854 Question 6 Use same cost data from last question and 12% annual rate of return. Calculate annual worth at end of Year 3. O 66.765 O 64332 O 67.428 O 66256 D Question 7 Use the same cost data of the machine from the above 2 questions and 12% interest rate per year. What is the ESL of this machine? 01 04
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. A manager has been presented with two proposals for automating a production process. Proposal A involves an initial cost of $15,000 and an annual operating costof $2,000 per year for the next 4 years. Thereafter, the operating cost is expected to increase by $100 per year. This equipment is expected to have a 10-year life with no salvage value.Proposal B requires an initial investment of $28,000 and an annual operating cost of $1,200 per year for the first 3 years. Thereafter, theoperating cost is expected to increase by $120 per year. This equipment is expected to last for 20 years and will have a $2,000 salvage value. If the company's minimum attractive rate of return is 10%, which proposal should be accepted on the basis of present worth analysis?