Three mutually exclusive design alternatives are being considered. The estimated sales and cost data for each alternative are given in Table 1. The MARR is 20% per year. Annual revenues are based on the number of units sold and the selling price. Annual expenses are based on fixed and variable costs. Determine which selection is preferable based on AW. Assume all units are produced and sold each year. Table 1 Investment cost Estimated unit to be sold/year Unit Selling price, RM/unit Variable cost, RM/unit Annual Expense (fixed) Market value Useful life A RM 30,000 15,000 RM 3.50 RM 1.00 RM 15,000 0 10 years B RM 60,000 20,000 RM 4.40 RM 1.40 RM 30,000 RM 20,000 10 years C RM 50,000 18,000 RM 4.10 RM 1.15 RM 26,000 RM 15,000 10 years a) Determine which design should be selected on the basis of the Present Worth Method. b) Confirm your selection by using the Future Worth and Annual Worth methods.

Three mutually exclusive design alternatives are being considered. The estimated sales and cost data for each alternative are given in Table 1. The MARR is 20% per year. Annual revenues are based on the number of units sold and the selling price. Annual expenses are based on fixed and variable costs. Determine which selection is preferable based on AW. Assume all units are produced and sold each year. Table 1 Investment cost Estimated unit to be sold/year Unit Selling price, RM/unit Variable cost, RM/unit Annual Expense (fixed) Market value Useful life A RM 30,000 15,000 RM 3.50 RM 1.00 RM 15,000 0 10 years B RM 60,000 20,000 RM 4.40 RM 1.40 RM 30,000 RM 20,000 10 years C RM 50,000 18,000 RM 4.10 RM 1.15 RM 26,000 RM 15,000 10 years a) Determine which design should be selected on the basis of the Present Worth Method. b) Confirm your selection by using the Future Worth and Annual Worth methods.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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