Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 29P
(a):
To determine
Calculate the present worth.
(b):
To determine
Calculate the annual worth.
(c):
To determine
Calculate the future worth.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
You are about to buy a piece of equipment (machine Alpha) for a project.
The initial cost is $500,000 and the annual maintenance costs is
$15,000. Another company offers you a second option (Machine Beta)
for which the annual maintenance cost is $20,000. What is the
maximum price (the initial cost) you would be willing to pay for the
second option? Both machines have the same useful life of 11 years and
the difference between their performances is negligible. Assume an
annual interest rate of 4%.
$767,524
$667,197
$456,197
$567,524
A client has an existing CAD/CAM system that costs $95,000 per year to lease (payable at the end of each year of use) and a new contract the client is considering entering will fix the price for over the next four years. The client is also considering purchasing a CAD/CAM system to replace its currently leased system (rather than renewing / entering a new lease contract). The new system will cost $450,000 to purchase and install. The system has an estimated life of five years, when it is expected to become obsolete, but it will have a salvage value of $25,000. The interest rate is projected to be 6% per year during the life of the project.
a. Draw a cash flow diagram for the next four years for the existing system (leased system) and a separate cash flow diagram for the system that is being considered for purchase.
b. For each option (leasing and buying), calculate the value of all cash receipts and disbursements at the end of the third year.
c. Compare the value of each option at…
An airline is considering two types of engine systems for use in its planes. Each has the same life and the same maintenance and repair record. System A costs $100,000 and uses 38,000 gallons per 1,000 hours of operation at the average load encountered in passenger service. System B costs $340,000 and uses 27,000 gallons per 1,000 hours of operation at the same level. Both engine systems have three-year lives before any major overhaul is required. On the basis of the initial investment, the systems have 1% salvage values. If jet fuel costs $2.32 a gallon (year 1) and fuel consumption is expected to increase at the rate of 10% per year because of degrading engine efficiency, which engine system should the firm install? Assume 3,000 hours of operation per year and a MARR of 11%. Use the AE criterion. What is the equivalent operating cost per hour for each engine? Assume an end-of-year convention for the fuel cost.
Chapter 11 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 11 - Prob. 1PCh. 11 - Prob. 2PCh. 11 - Prob. 3PCh. 11 - Prob. 4PCh. 11 - Prob. 5PCh. 11 - An annuity provides for 10 consecutive end-of-year...Ch. 11 - Prob. 7PCh. 11 - Prob. 8PCh. 11 - Prob. 9PCh. 11 - Prob. 10P
Ch. 11 - Prob. 11PCh. 11 - Prob. 12PCh. 11 - Prob. 13PCh. 11 - Prob. 14PCh. 11 - Prob. 15PCh. 11 - Prob. 16PCh. 11 - Prob. 17PCh. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - Prob. 20PCh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Prob. 23PCh. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26PCh. 11 - Prob. 27PCh. 11 - Prob. 28PCh. 11 - Prob. 29PCh. 11 - Prob. 30PCh. 11 - Prob. 31PCh. 11 - Prob. 1STCh. 11 - Prob. 2STCh. 11 - Prob. 3ST
Knowledge Booster
Similar questions
- Tom is considering purchasing a £20,500 car. After five years, he will be able to sell the vehicle for £7,500. Petrol costs will be £2,100 per year, insurance £650 per year, and parking £550 per year. Maintenance costs will be £900, rising by £400 per year thereafter. The alternative is for Tom to take taxis everywhere. This will cost an estimated £7,000 per year. Tom will rent a vehicle each year at a total cost (to year-end) of £900 for the family vacation, if he has no car. If Tom values money at 12% annual interest, should he buy the car? Use an annual worth comparison method (Perform all calculations using 5 significant figures and round any monetary answers to the nearest dollar). The annual cost of operating an Auto is: Number The annual cost of using taxis as an alternative is: Which option should Tom take (enter either 'Auto' or 'Taxi'? Numberarrow_forwardBenny is the manager of an office-support business that supplies copying, binding, and other services for local companies. He must replace a worn-out copy machine that is used for black-and-white copying. He is considering two machines, and each of these has a monthly lease cost plus a cost for each page that is copied. Machine 1 has a monthly lease cost of $639, and there is a cost of $0.030 per page copied. Machine 2 has a monthly lease cost of $747, and there is a cost of $0.045 per page copied. Customers are charged $.08 per page copied. If Benny expects to make 75,000 copies per month, what would be the monthly cost for each machine? (round your answers to the highest whole number)arrow_forwardYou are requested to pick an implementation technology for your embedded product to maximize the profit. You have a competitor that will release a similar product 25 weeks from today. If the maximum expected product lifetime in the market is 50 weeks and the projected maximum number of sold units/week by the market leader is 1M units. Assume that the price is constant throughout the product lifetime ($50 USD). 'The available implementation technologies are: T1 T2 T3 NRE cost Unit cost (material and manufacturing) 100 USD Time to market 100K USD 1M USD 10M USD 5 USD 40 weeks 25 USD | 20 weeks 30 weeks a) What is the maximum revenue that might be generated for this product? b) Assuming no competition and ignoring the given max number of sold units/week, what is the max number of units sold per week to achieve the same profit from T1 and T3? Assume no competition. c) With the competition, what is the maximum profit that might be achieved if you go with T1? d) With the competition, what is…arrow_forward
- An appliance manufacturing company intends to produce three models of electric fans. These models are the Stand Fan, Wall Fan, and Ceiling Fan. The table below shows the available information on these three models. Stand Fan P 750.00 P 300.00 How many units of each model should be sold each month to breakeven? Type of Cost Selling Price/Unit Variable Cost/Unit Wall Fan P 500.00 P 250.00 Ceiling Fan P 1,000.00 P 500.00 What are the breakeven sales each month?arrow_forwardYou are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $17,000 to purchase and which will have OCF of -$1,800 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $25,000 to purchase and which will have OCF of -$950 annually throughout that vehicle's expected 4-year life. Both cars will be worthless at the end of their life. You intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future. If the business has a cost of capital of 12 percent, calculate the EAC. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Scion's EAC Toyota's EAC Which one should you choose? O Scion XA O Toyota Priusarrow_forwardJenny Tanaka wants to buy a new car, and the annual gasoline expense is a major consideration. Her present car gets 25 miles per gallon (mpg), and she is considering purchasing a new car that gets 40 mpg. Jenny now drives about 12,000 miles per year and pays $3.25 per gallon of gasoline. She therefore calculates an annual gasoline consumption of 480 gallons for her 25 mpg car (12,000 miles/25 mpg) compared to 300 gallons consumed per year for the 40 mpg car (12,000 miles/40 mpg). Since driving the higher- mileage car would use 180 gallons less per year, Jenny estimates the new car will save her $585 in gasoline expense per year (180 gallons 3 $3.25 per gallon). Suppose Jenny buys the 40 mpg car. According to economic theory, Jenny's actual annual savings on gasoline will be 7 1 C 1 U C VI 10 V K W S TACAZEC 10 GUNS TOMBER 2 than her initial estimate of $585.arrow_forward
- Kolkmeyer Manufacturing Company is considering adding two machines to its manufacturing operation. This addition will bring the number of machines to nine. The president of Kolkmeyer asked for a study of the need to add a second employee to the repair operation. The arrival rate is 0.06 machines per hour for each machine, and the service rate for each individual assigned to the repair operation is 0.5 machines per hour. Compute the operating characteristics if the company retains the single-employee repair operation. If required, round your answers to four decimal places. P0 = fill in the blank 1 Lq = fill in the blank 2 L = fill in the blank 3 Wq = fill in the blank 4 hours W = fill in the blank 5 hours Compute the operating characteristics if a second employee is added to the machine repair operation. If required, round your answers to four decimal places. P0 = fill in the blank 6 Lq = fill in the blank 7 L = fill in the blank 8 Wq = fill…arrow_forwardThe president's executive jet is not fully utilized. You judge that its use by other officers would increase direct operating costs by only $37,000 a year and would save $100,000 a year in airline bills. On the other hand, you believe that with the increased use the company will need to replace the jet at the end of three years rather than four. A new jet costs $1.27 million and (at its current low rate of use) has a life of Five years. Assume that the company does not pay taxes. All cash flows are forecasted in real terms. The real opportunity cost of capital is 10%. a. Calculate the equivalent annual cost of a new jet. Note: Do not round intermediate calculations. Enter your answer in dollars not in millions. Round your answer to 2 decimal places. Enter your answer as a positive value. b. Calculate the present value of the additional cost of replacing the jet one year earlier than under its current usage. Note: Do not round intermediate calculations. Enter your answer in dollars not…arrow_forwardIf the system costs $600 to fix every time it breaks down, what is the expected fixing cost if the system runs for 1000 times?arrow_forward
- A steam boiler is required as part of the design of a new plant. The types of fuel that can be used to ignite the boiler are natural gas, fuel oil, and coal. The cost of installation including all required controls is $40,000 for natural gas, $50,000 for fuel oil, and $120,000 for coal. In addition, the annual cost of fuel oil is $8,000 less than the annual cost of natural gas and $12,000 more than the annual cost of coal. The boiler is to be utilized for 20 years and interest rate is 8%. Using the most suitable approach, determine the best alternative. Is there any other consideration for the obtained result? As one way, please solve using either Cash Flow Analysis, Present Worth Analysis, or any other similar method. As a second way, use Excel software and include all required command statements require to solve it.arrow_forwardOdysseus is fascinated by Microsoft's new Surface Laptop Studio. He is happy to purchase this product at $2,200 but not likely to purchase it at $2,201. This product is currently available at Microsoft Online Store at $1,900. It is believed that Microsoft had spent $1,100 per unit to outsource its assembly to its supplier. This supplier will switch its production line towards Apple's iPad Pro if Microsoft does not guarantee at least $950 per unit (which is the amount Apple guarantees). Let's assume that Microsoft produced only one unit of Surface Laptop Studio. Odysseus purchased this product. Please fill in the blanks below: What is Odysseus' willingness to pay? What is Odysseus' surplus (consumer surplus)? What is the total value captured by Microsoft? What is supplier's opportunity cost? What is the total value created by Microsoft?arrow_forwardB.21.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
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)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
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-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education