Engineering Economy
16th Edition
ISBN: 9780133582819
Author: Sullivan
Publisher: DGTL BNCOM
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Textbook Question
Chapter 10, Problem 29FE
A flood control project with a life of 16 years will require an investment of $60,000 and annual maintenance costs of $5,000. The project will provide no benefits for the first two years but will save $24,000 per year in flood damage starting in the third year. The appropriate MARR is 12% per year. Use this information to answer problems 10-29 and 10-30. Select the closest answer.
10-29. What is the conventional B–C ratio for the flood control project?
- (a) 1.53
- (b) 1.33
- (c) 1.76
- (d) 2.20
- (e) 4.80
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Problem 1
Two mutually exclusive alternatives are being considered for a site equipment at a petroleum refinery. One of
these alternatives must be selected. The firm's MARR is 9% per year. The estimated cash flows for each alternative
are below. If the repeatability assumption is made, which alternative is better and what is the AW of the selected
alternative?
Please round your answer to the nearest integer.
Equipment A:
• Investment Cost: $77,000
• Annual Revenue: $21,000
• Market Value: $11,000
Useful Life: 9 Years
Equipment B:
Investment Cost: $28,000
• Annual Revenue: $20,000
• Market Value: $8,000
• Useful Life: 6 Years
The estimated negative cash flows for three design alternatives are shown below. The MARR is 13%
per year and the study period is four years. Which alternative is best based on the IRR method?
Doing nothing is not an option.
Capital
investment
Annual expenses
EOY
0
A. Alternative B
B. Alternative A
C. Alternative C
1-4
A
$82,400
6,200
Alternative
B
$64,500
12,100
с
$71,900
9,550
Which alternative would you choose as a base one? Choose the correct answer below.
The estimated negative cash flows for three design alternatives are shown below. The MARR is 10% per year and the study period is four years.
Which alternative is best based on the IRR method? Doing nothing is not an option.
Capital
investment
Annual expenses
OA. Alternative B
OB. Alternative C
OC. Alternative A
EOY
0
1-4
A
$85,700
8,500
Alternative
B
$64,500
Which alternative would you choose as a base one? Choose the correct answer below.
15,150
C
$71,900
12,450
Chapter 10 Solutions
Engineering Economy
Ch. 10 - The Adams Construction Company is bidding on a...Ch. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - A retrofitted space-heating system is being...Ch. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10P
Ch. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 16PCh. 10 - Four mutually exclusive projects are being...Ch. 10 - Two municipal cell tower designs are being...Ch. 10 - Prob. 19PCh. 10 - Prob. 20PCh. 10 - Prob. 21PCh. 10 - Prob. 22PCh. 10 - You have been requested to recommend one of the...Ch. 10 - Prob. 24PCh. 10 - Prob. 25PCh. 10 - Prob. 26FECh. 10 - Prob. 27FECh. 10 - Prob. 28FECh. 10 - A flood control project with a life of 16 years...Ch. 10 - Prob. 30FECh. 10 - Prob. 31FE
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- Alternative 3 is incorrect EUAC=( Equivalent Annaul COst of Initial Investment)+ (Expected Moderate annaual flood damage cost )+ (expected severe annaual flood cost )arrow_forwardThe estimated negative cash flows for three design alternatives are shown below. The MARR is 14% per year and the study period is five years. Which alternative is best based on the IRR method? Doing nothing is not an option. Capital investment Annual expenses EOY 0 A. Alternative C B. Alternative B OC. Alternative A 1-5 CLEAN A $81,500 7,500 Alternative B $64,400 12,620 Which alternative would you choose as a base one? Choose the correct answer below. Analyze the difference between the base alternative and the second-choice alternative. C $71,000 10,420arrow_forward11arrow_forward
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- can you please show me the proper solutionarrow_forwardPROBLEM #7: Three alternatives to incorporate improved techniques to manufacture Vertical Axis Wind Turbine have been developed and costed. Compare the alternatives below using capitalized cost and an interest rate of 12% per 4,55 and determine the best alternative among the following: First Alternative Second Alternative Third Alternative First Cost Php. 2,000.000 Php 3,000,000 Php 10,000,000 Net income per quarter Php. 300.000 Php 100,000 Php 400,000 Salvage value Php. 50.000 Php 70,000 N/A Life years 4 8 00arrow_forwardAlternative Annualized first cost. $/year Annual M&O cost. $/year Annual benefits, $/year Annual disbenefits, $/year Life, years Multiple Choice O O fund both X and Y fund neither fund Y fund X 60,000 90.000 45,000 35,000 110.000 150.000 20,000 45,000 Show Transcribed Text for the two independent projects shown determine which if any should be funded i=10% per year using B/C ratio method.arrow_forward
- The four alternatives described below are being evaluated Alternative A ABCD Investment IRR $200,000 15% $75,000 16% $40,000 29% $100,000 17% Other information: IRRB-C = 5%; IRRD-B = 19%; IRRD-C = 7%; IRRA-D=13%; IRRA-B = 14%; IRRA-C=11% 1. If these alternatives are mutually exclusive, which one should be selected if MARR=10%? Clearly show your steps for full credit.arrow_forwardA supermarket chain buys loaves of bread from its supplier at $0.50 per loaf. The chain is considering two options to bake its own bread. Neither machine has a market value at the end of seven years, and MARR is 12% per year. Use this information to answer (Select the closest answer), What is the minimum number of loaves that must be sold per year to justify installingMachine A instead of buying the loaves from the supplier? (a) 7,506 (b) 22,076 (c) 37,529 (d) 75,059 (e) 15,637.arrow_forwardUsing exactly the same information from Problem No. 1 above, calculate the Annual Worth of Project Y at 8% per year interest rate. You can see the data in picture one, answer the problem in the second picture.arrow_forward
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