Engineering Economy
16th Edition
ISBN: 9780133582819
Author: Sullivan
Publisher: DGTL BNCOM
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Question
Chapter 11, Problem 5P
(a):
To determine
Calculate the breakeven investment.
(b):
To determine
Calculate the time period.
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You are faced with a decision on an investment proposal. Specifically, the estimated additional income from the investment is $125,000 per year; the investment cost is $400,000; and the first year estimated expense of $20,000 and will increase a rate of 5% per year. Assume an 8-year analysis period, no salvage value, and MARR = 15% per year.
a. Calculate the PW and FW of this proposal?
b. What is the ERR ( Ԑ=MARR) of this proposal?
c. What is the Simple and Discounted payback?
include the cash flow diagram and conclusion
As supervisor of a facilities engineering department, you consider mobile cranes to be critical equipment. The purchase of a new, medium-sized truck-mounted crane is being evaluated. The economic estimates for the two best alternatives are shown in the following table. MARR is at 15% per year. You can use the assumption of repeatability in this case.
Show that the same selection is made for the following methods:a. RORAI method
b. AWC method
c. PW method
A tunnel to transport water initially cost
$1,000,000 and has expected maintenance
costs that will occur in a 6-year cycle as
shown below, assume MARR is 10% per year.
End of Year:
3
Maintenance: $35,000 $35,000 $35,000 $45,000 $45,000 $60,000
Compute the Equivalent Annual Cost of the
maintenance.
Hint: Don't insert the negative sign
Compute the Capitalized Cost?
Hint: Don't insert the negative sign
Chapter 11 Solutions
Engineering Economy
Ch. 11 - Prob. 1PCh. 11 - Refer to Example 11-2. Assuming gasoline costs...Ch. 11 - Prob. 3PCh. 11 - Prob. 4PCh. 11 - Prob. 5PCh. 11 - Prob. 6PCh. 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 - You have decided to purchase a new automobile with...Ch. 11 - Prob. 17PCh. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - A bridge is to be constructed now as part of a new...Ch. 11 - An aerodynamic three-wheeled automobile (the Dart)...Ch. 11 - Prob. 23PCh. 11 - Prob. 24SECh. 11 - Prob. 25SECh. 11 - Prob. 26SECh. 11 - Prob. 27SECh. 11 - Prob. 28SECh. 11 - Prob. 29SECh. 11 - Prob. 30FECh. 11 - Prob. 31FECh. 11 - A supermarket chain buys loaves of bread from its...Ch. 11 - A supermarket chain buys loaves of bread from its...Ch. 11 - Prob. 34FECh. 11 - Prob. 35FECh. 11 - Prob. 36FECh. 11 - Prob. 37FECh. 11 - Prob. 38FECh. 11 - Prob. 39FECh. 11 - Prob. 40FECh. 11 - Prob. 41FECh. 11 - Prob. 42FE
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- A distribution company is considering three different alternatives to satisfy their customer's demands. Their options are to rent a ready distribution center (D01), Rent and mobilize a center (D02), or outsourcing (OS). The estimate for each method is shown. The lifetime for D01, D02, and OS are 3, 6, and 2 respectively. MARR is 0.04 per year, and the percentage of change for all of the cases are 0 % Note: all units are in thousand $ D01 First Cost, $ Annual Operation Cost, $ Salvage Value, $ a: Calculate the Fw of D01? -136 -92 28 D02 OS -973 0 -59 -123 333 0arrow_forwardWhat is the present worth of Option 1? $arrow_forwardThree mutually exclusive alternatives are being considered for the production equipment at a tissue paper factory. The estimated cash flows for each alternative are given here. (All cash flows are in thousands.)Which equipment alternative, if any, should be selected? The firm’s MARR is 20% per year. Please state your assumptions.arrow_forward
- Decision D6, which has three possible choices (X, Y, or Z), must be made in year 3 of a 6-year study period in order to maximize EPW). Using an MARR of 18% per year, the investment required in year 3, and the estimated cash flows for years 4 through 6, determine which decision should be made in year 3. High Low High 06 Low 2 High Low Investment, Cash Flow, (Year Cash Flow, $1000 Cash Flow, Year 31 3) (Year 4) $1000 (Year 5) Cash Flow, $1000 (Year 6) Outcome Probability 3 4 5 6 High (X) $-150,000 $50 $50 $50 0.5 Low (X) $40 $30 $20 0.5 High (Y) $-73,000 $30 $40 $50 0.45 Low (Y) $30 $30 $30 0.55 High (Z) $-240,000 $190 $170 $150 0.7 Low (Z) $-30 $-30 $-30 0.3 The present worth of X is $arrow_forwardConsider the following two investment alternatives. Determine the range of investment costs for Alternative B (i.e., min. valuearrow_forwardThe IRR method is used to evaluate the following two mutually exclusive alternative investments. The MARR is 8% per year Alternative R S versus R Initial cost $250,000 $400,000 $150,000 Net Annual Revenues $58,766 $80,919 $22,153 Service life (years) 10 10 10 IRR 19.6% 15.4% 7.8% Which of investment is more economical and how is it determined from the information given above O A. Alternative R because it has a higher IRR B. Alternative S because the incremental IRR is less than MARR C. Alternative S because it has higher initial cost and annual revenues D. Alternative R because the incremental IRR is less than MARRarrow_forwardThe following five alternatives that are evaluated by the rate of return method, If the alternatives are independent and the MARR is 15% per year, the onels) to select is (are) Incremental ROR, N. When Compared with Alternative Initial Investment,S Alternative Alternative A BC DE 10.6 27.3 194 353 25.0 -25,000 -35,000 13.1 38.5 24.4 -40,000 13.4 46.5 27.3 26.8 -60,000 25.4 -75,000 20.2 Only D O Only D and E O Only A D, and E O Only Earrow_forwardA recent graduate who wants to start an excavation/earth-moving business is trying todetermine which size of used dump truck to buy. As the bed size increases, new incomeincreases; however, the graduate is uncertain whether the incremental expenditure requiredfor larger truck is justified. The cash flows associated with each size truck are estimated below.The contractor has established a MARR of 18% per year, and all trucks are expected to have aremaining economic life of 5 years. Using a Do Nothing (DN) option, using SPREADSHEET only,a. Determine which size truck should be purchased.b. If two trucks are to be purchased, what should be size of the second truck?arrow_forwardTwo mutually exclusive design alternatives are being considered the estimated cash flow's for each alternative are given below. The MARR is 12% per year. The decision-maker can select one of these alternatives, or decide to select none of them make a recommendation based on the following methods.arrow_forwardDetermine the ERR of the engineering project shown below when the MARR is 189% per year and the reinvestment rate is 15% per year. Express your answer in percent rounded to the nearest hundredths. Investment cost $10,290 Expected life 7 years Market (salvage) value $894 Annual receipts $9,168| Annual expenses $5,191arrow_forwardDecision D6, which has three possible choices (X, Y, or Z), must be made in year 3 of a 6-year study period in order to maximize EPW). Using an MARR of 16% per year, the investment required in year 3, and the estimated cash flows for years 4 through 6, determine which decision should be made in year 3. High Low High Y D6 Low High Low Investment, Cash Flow, (Year Cash Flow, $1000 3) Cash Flow, $1000 (Year 6) Cash Flow, Outcome Year 3 (Year 4) $1000 (Year 5) Probability 3 High (X) $-190,000 $50 $50 $50 0.58 $40 Low (X) High (Y) Low (Y) High (Z) Low (Z) $30 $40 $30 $170 $-30 $20 $50 $30 $150 $-30 0.42 $-54,000 $30 $30 $190 $-30 0.45 0.55 $-240,000 0.7 0.3 The present worth of X is $ [ The present worth of Y is $ The present worth of Z is $ Select decision branch Yarrow_forwardMARR is 10% per year. Compare the two plans using the Capitalized Cost Method. The first plan calls for an initial investment of $500,000, with expenses of $20,000 per year for the first 20 years and $30,000 per year thereafter. It also requires an expenditure of $200,000 20 years after the initial investment, and this will repeat every 20 years thereafter. The second plan has an initial investment of $700,000 followed by a single (one time) investment of $300,000 30 years later. It will incur annual expenses of $10,000 forever. Based on the Capitalized Cost measure.Which plan would you recommend?arrow_forwardarrow_back_iosSEE MORE QUESTIONSarrow_forward_ios
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