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The following three mutually exclusive alternative proposals are being considered for flood proofing a factory building that is located in an area subject to occasional flooding by nearby river. 1. Do nothing: Damage to the building in a moderate flood is $11,000 and in a severe flood it is $24,000. 2. Protect the building with a one-time initial expenditure of $20,000 so that the building can withstand moderate flooding without any damage and withstand severe flooding wit only a $10,000 damage. 3. Protect the building with a one-time initial expenditure of $32,000 so that the building can withstand any flooding with no damage at all. In any year, there is a 19% probability of moderate flooding and a 9% probability of severe flooding. Using a MARR of 6% per year and a service life of 8 years, determine which the three alternatives is the most economical. (a) Calculate EUAC values for each scenario (use negative numbers for costs) The expected EUAC for the "Do Nothing" alternative is $ The expected EUAC for Alternative 2 is $ (Round to the nearest whole number.) The EUAC for Alternative 3 is $ (Round to the nearest whole number.) (b) The most economical alternative is O A. Do nothing OB. Alternative 3. OC. Alternative 2 (Round to the nearest whole number.)

The following three mutually exclusive alternative proposals are being considered for flood proofing a factory building that is located in an area subject to occasional flooding by nearby river. 1. Do nothing: Damage to the building in a moderate flood is $11,000 and in a severe flood it is $24,000. 2. Protect the building with a one-time initial expenditure of $20,000 so that the building can withstand moderate flooding without any damage and withstand severe flooding wit only a $10,000 damage. 3. Protect the building with a one-time initial expenditure of $32,000 so that the building can withstand any flooding with no damage at all. In any year, there is a 19% probability of moderate flooding and a 9% probability of severe flooding. Using a MARR of 6% per year and a service life of 8 years, determine which the three alternatives is the most economical. (a) Calculate EUAC values for each scenario (use negative numbers for costs) The expected EUAC for the "Do Nothing" alternative is $ The expected EUAC for Alternative 2 is $ (Round to the nearest whole number.) The EUAC for Alternative 3 is $ (Round to the nearest whole number.) (b) The most economical alternative is O A. Do nothing OB. Alternative 3. OC. Alternative 2 (Round to the nearest whole number.)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 10E
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The following three mutually exclusive alternative proposals are being considered for flood proofing a factory building that is located in an area subject to occasional flooding by a nearby river. 1. Do nothing: Damage to the building in a moderate flood is $11,000 and in a severe flood it is $24,000. 2. Protect the building with a one-time initial expenditure of $20,000 so that the building can withstand moderate flooding without any damage and withstand severe flooding with only a $10,000 damage. 3. Protect the building with a one-time initial expenditure of $32,000 so that the building can withstand any flooding with no damage at all. In any year, there is a 19% probability of moderate flooding and a 9% probability of severe flooding. Using a MARR of 6% per year and a service life of 8 years, determine which of the three alternatives is the most economical. (a) Calculate EUAC values for each scenario (use negative numbers for costs) The expected EUAC for the "Do Nothing" alternative is $ (Round to the nearest whole number.) The expected EUAC for Alternative 2 is $ (Round to the nearest whole number.) The EUAC for Alternative 3 is $ (Round to the nearest whole number.) (b) The most economical alternative is OA. Do nothing B. Alternative 3 OC. Alternative 2
Transcribed Image Text:The following three mutually exclusive alternative proposals are being considered for flood proofing a factory building that is located in an area subject to occasional flooding by a nearby river. 1. Do nothing: Damage to the building in a moderate flood is $11,000 and in a severe flood it is $24,000. 2. Protect the building with a one-time initial expenditure of $20,000 so that the building can withstand moderate flooding without any damage and withstand severe flooding with only a $10,000 damage. 3. Protect the building with a one-time initial expenditure of $32,000 so that the building can withstand any flooding with no damage at all. In any year, there is a 19% probability of moderate flooding and a 9% probability of severe flooding. Using a MARR of 6% per year and a service life of 8 years, determine which of the three alternatives is the most economical. (a) Calculate EUAC values for each scenario (use negative numbers for costs) The expected EUAC for the "Do Nothing" alternative is $ (Round to the nearest whole number.) The expected EUAC for Alternative 2 is $ (Round to the nearest whole number.) The EUAC for Alternative 3 is $ (Round to the nearest whole number.) (b) The most economical alternative is OA. Do nothing B. Alternative 3 OC. Alternative 2
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