Engineering Economy, Student Value Edition (17th Edition)
17th Edition
ISBN: 9780134838137
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Chapter 12, Problem 3P
A new snow making machine utilizes technology that permits snow to be produced in ambient temperature of 70 degrees Fahrenheit or below. The estimated cash flows for the ski resort contemplating this investment are uncertain as shown below (note: pr. = probability).
The machine is expected to have a useful life of 12 years, and the MARR of the ski resort is 8% per year. What is the expected present worth of this investment?
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It is estimated that an investment alternative with an
initial investment cost of 150000 TL will generate
annual revenues of 85000 TL and annual expenses of
20000 TL. It is expected to have a scrap value of 95000
TL at the end of its 5-year life. Find out how sensitive
the investment decision of this investment alternative
is to its revenues. (MARR: %10)
The tree diagram in figure below describes the uncertain cash flows for an engineering project. The analysis period is two years, and MARR = 12% per year. Based on this information,
a. What are the E(PW), V(PW), and SD(PW) of the project?
b. What is the probability that PW≥ 0?
Click the icon to view the tree diagram.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year.
a. Calculate the E(PW), V(PW), and SD(PW) of the project.
E(PW) = $ (Round to the nearest dollar.)
More Info
0
-$29,000
0.2
0.6
0.2
Time Period
1
$5,500
$11,000
$17,500
0.1
0.1
0.8
0.1
0.7
0.2
0.2
0.3
0.5
2
$17,200
$20,200
$24,800
$20,100
$24,600
$29.300
$21,900
$28,000
$31,100
C
Q
- X
More Info
N
1
2
3
4
5
Discrete Compounding; i = 12%
Compound
Amount
Factor
To Find F
Given A
FIA
1.0000
2.1200
3.3744
4.7793
6.3528
Single Payment
Compound
Amount
Factor
To Find F
Given P
F/P
1.1200
1.2544
1.4049
1.5735
1.7623
Present
Worth Factor
To Find P
Given F
P/F
0.8929
0.7972…
If the company's MARR is known to be 10%, is the investment justified?
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
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