Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![8.(new question) An engineer proposes to spend $95,000 on a capital project
to upgrade a package delivery system. The project is expected to have labor
savings of $20,000 a year plus reduce scrap costs by $5000 a year. There is
expected to be no salvage value at the end of the equipment life, which is
anticipated to be 7 years. MARR is 12%. This question is in five parts.
The engineer next performs a sensitivity analysis for a best case and worst case
scenario:
Best Case
Worst Case
Initial Cost
$95,000
$110,000
Labor Savings
$25,000
$15,000
Scrap Cost Reduction
$6,000
$4,000
Part 5: What is the Rate of Return (ROR) in the worst case scenario? (your
answer should be a positive or negative number and do not use % signs,
commas or $ signs; round to the nearest whole number %)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fab8abd67-3026-40c9-b5e0-816ea7c050ab%2Fe1541dc7-13c1-4399-bc93-119e77cd738e%2F8yttfv5_processed.jpeg&w=3840&q=75)
Transcribed Image Text:8.(new question) An engineer proposes to spend $95,000 on a capital project
to upgrade a package delivery system. The project is expected to have labor
savings of $20,000 a year plus reduce scrap costs by $5000 a year. There is
expected to be no salvage value at the end of the equipment life, which is
anticipated to be 7 years. MARR is 12%. This question is in five parts.
The engineer next performs a sensitivity analysis for a best case and worst case
scenario:
Best Case
Worst Case
Initial Cost
$95,000
$110,000
Labor Savings
$25,000
$15,000
Scrap Cost Reduction
$6,000
$4,000
Part 5: What is the Rate of Return (ROR) in the worst case scenario? (your
answer should be a positive or negative number and do not use % signs,
commas or $ signs; round to the nearest whole number %)
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
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.Recommended textbooks for you
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education