Engineering Economy, Student Value Edition (17th Edition)
17th Edition
ISBN: 9780134838137
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 13P
(a):
To determine
Calculate the expected present worth.
(b):
To determine
Calculate the probability.
(c):
To determine
Expected annual value.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
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
Please provide answer in 1 hr
A remotely situated fuel cell has an installed cost of $2,000 and will reduceexisting surveillance expenses by $350 per year for eight years. The border security agency’s MARR is 10% per year. Solve, a. What is the minimum salvage (market) value after eight years that makes the fuel cell worth purchasing? b. What is the fuel cell’s IRR if the salvage value is negligible?
Chapter 12 Solutions
Engineering Economy, Student Value Edition (17th Edition)
Ch. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - A new snow making machine utilizes technology that...Ch. 12 - Prob. 4PCh. 12 - Prob. 5PCh. 12 - Prob. 6PCh. 12 - Prob. 7PCh. 12 - Prob. 8PCh. 12 - Prob. 9PCh. 12 - Prob. 10P
Ch. 12 - Prob. 11PCh. 12 - Prob. 12PCh. 12 - Prob. 13PCh. 12 - Prob. 14PCh. 12 - Prob. 15PCh. 12 - Prob. 16PCh. 12 - Prob. 17PCh. 12 - Prob. 18PCh. 12 - Prob. 19PCh. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - If the interest rate is 8% per year, what decision...Ch. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26SE
Knowledge Booster
Similar questions
- Consider the cashflow (n = 10 years, MARR = e = 14%) Cash Flow A Investment Revenues P 180,000 P 350,000 per year a. Calculate the annual worth (AW) of the project Expenses P 400,000 per year for the first 3 years, decreasing by P 50,000 per year thereafter Salvage Value P 40,000arrow_forward7.arrow_forwardA new product requires an initial investment of $140,000, and an annual operating expense of $32,000. This product is estimated to generate $47,000 revenue in the first year, and the revenue is expected to increase by $7,000 each year thereafter for 11 years. Determine whether this new product is a good investment using the ERR method. Assume MARR is 4% per year.arrow_forward
- What is the ERR? (Write in decimal form)Is the project acceptable?arrow_forwardWhen the country’s economy is expanding, AB Investment Company is optimistic and expects a MARR of 15% on new investments. However, in a receding economy the expected return is 8%. Normally a 10% per year return is anticipated. An expanding economy causes the estimates of project life to go down about 20%, and a receding economy causes the life values to increase about 10%. Additionally, the market value after the project’s life varies widely; optimistically, it may be as high as 50% more or as low as 75% of the initial investment. (a) Summarize the optimistic, most likely, and pessimistic estimates in tabular form. (b) Use a spreadsheet to calculate and plot the sensitivity of PW versus (1) MARR, (2) life values, and (3) market value for possible investment in one of two locations. Use the most likely estimates for the other parameters. (c) Considering all the analyses, under which scenario, if any, should location Miami or Houston be rejected? All monetary values are in $1000 units.…arrow_forwardNowadays it is very important to reduce one's carbon "footprint" (how much carbon we produce in our daily lifestyles). Minimizing the use of fossil fuels and instead resorting to renewable sources of energy (e.g., solar energy) are vital to a "sustainable" lifestyle and a lower carbon footprint. Let's consider solar panels that prewarm the water fed to a conventional home water heater. The solar panels have an installed cost of $3000 and they reduce the homeowner's energy bill by $30 per month. The residual value of the solar panels is negligible at the end of their 10-year life. What is the annual effective IRR of this investment? The annual effective IRR of this investment is%. (Round to two decimal places.)arrow_forward
- A company is evaluating two alternatives to produce a new product. The initial cost of Alt Alpha is $-160,000, with an annual maintenance and operations cost of $-40,000, and final salvage value at the end of year 2 of $10,000. The initial cost of Alt Timore is $-500,000, with an annual maintenance and operations cost of $-10,000, and final salvage value at the end of year 4 of $33,000. Assume a MARR of 19% per year. Calculate the present worth of each alternative. The present worth for Alt Alpha is $ The present worth for Alt Timore is $ Selectarrow_forwardVidhi is investing in some rental property in Collegeville and is investigating her income from the investment. She knows the rental revenue will increase each year, but so will the maintenance expenses. She has been able to generate the data that follows regarding this investment opportunity. Assume that all cash flows occur at the end of each year and that the purchase and sale of this property are not relevant to the study. • If Vidhi's MARR = 6% per year, is this investment a profitable undertaking? Use Future Worth method! Year Revenue Year Expenses 1 $6,000 1 $3,100 2 6,200 2 3,300 6,300 3 3,500 6,400 4 3,700 6,500 5 3,900 6,600 6 6,100 6,700 7 4,300 6,800 8 4,500 6,900 4,700 7,000 4,900 3 4 5 6 7 8 9 10 9 10arrow_forwardThe ford motor company is considering three mutually exclusive electronic stability control systems for protection against rollover of its automobiles. The investment (study) period is four years, and MARR is 12% per year. Data for the fixture costs of the systems are as follows: plot the AW of each alternative against MARR as the MARR varies across this range:4%, 8%, 12%, 16%, and 20%. What can you generalize about the range of the MARR for which each alternative is preferred?arrow_forward
- Required information A process for producing the mosquito repellant Deet has an initial investment of $240,000 with annual costs of $60,000. Income is expected to be $90,000 per year. What is the annual breakeven production quantity for both payback periods if net profit, that is, income minus cost, is $10 per gallon? When i = 0%, the annual breakeven production quantity is determined to be[ When i=12%, the annual breakeven production quantity is determined to be gallons per year. gallons per year.arrow_forwardAE Criterion - Single Project* *Blank & Tarquin (2005). Engineering Economy, 7th edition. Example 6.3. The owner of a pizza shop plans to purchase and install five portable in-car systems to increase delivery speed and accuracy. Each system costs $4600, has a 5-year useful life, and may be salvaged for an estimated $300. Total operating cost for all systems is $1000 for the first year, increasing by $100 per year thereafter. The owner estimates increased net income of $6000 per year for all five systems. Is this project financially viable at an MARR of 10%?arrow_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 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_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:PEARSON
Engineering 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 Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial 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