Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 14, Problem 24P
To determine
Calculate the present worth.
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A high-speed electronic assembly machine was purchased two years ago for $50,000. At the present time, it can be sold for $25,000 and replaced by a newer model having a purchase price of $42,500; or it can be kept in service for a maximum of one more year. The new assembly machine, if purchased, has a useful life of not more than two years. The projected resale values and operating and maintenance costs for the challenger and the defender are shown in the accompanying table on a year-by-year basis. The before-tax MARR is 15%.
Year
Challenger
Defender
Market Value
O&M Costs
Market Value
O&M Costs
0
$42,500
-
$25,000
-
1
31,000
$10,000
17,000
14,000
2
25,000
12,500
-
-
a. What is the total marginal cost of the challenger in EOY 1?
b. When should the machine be replaced?
c. What is the EUAC of the challenger in EOY 2?
A large city in the mid-West needs to acquire a street-cleaning machine to keep its roads looking nice year round.
A used cleaning vehicle will cost $85,000 and have a $20,000 salvage value at the end of its five year life. A new
system with advanced features will cost $150,000 and have $40,000 market value at the end of its five year life. The
new system is expected to reduce labor hours compared with the used system. Current street-cleaning activity
requires the used 'system to operate 8 hours per day for 20 days per month. Labor costs $50 per hour (including
fringe benefits), and MARR is 12% per year.
a. Find the breakeven percent reduction in labor hours for the new system.
b. If the new system is expected to be able to reduce labor hours by 17% compared with the used system, which
machine should the city purchase?
c. Investigate how sensitive the decision is to 1) changes in the market value of the new system and 2) the
productivity improvement of the new system. Graph your…
An equipment cost $90.000 initially. The market value the first year was 80,000
and has been declining at the rate of $6.000 yearly. The O & M costs in year 1
were $7.000 and have been increasing by $2.000 from year 2. Determine the
minimum cost life of this equipment for a MARR of 10 %.
Based on the chart below,
a. what is the economic life of this piece of equipment.
b. What is the minimum economic cost?
OM cost PWCost
Year
Cost
Salvage
EUAC
90000
1
7000
$96,363.64
80000
($26,000.00)
9000
$103,801.65
74000
(524.571.43)
3
11000
$112,066.12
68000
($24.519.64)
4
13000
$120,945.29
62000
($24.795.52)
15000
$130,259.11
56000
($25,189.37)
6
17000
$139,855.17
50000
(525.631.41)
7
19000
$149.605.17
44000
(526.091.88)
8
21000
$159,401.83
38000
($26,556.05)
9.
23000
$169,156.07
32000
($27,015.85)
10
25000
$178,794.65
26000
(527.466.63)
O a. 6 years b. $27,466.63
O a. 8 years b. $80.000
O a. 3 years b. $25,519.64
O a. 10 years b. $24.664.99
Chapter 14 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 14 - Prob. 1PCh. 14 - Prob. 2PCh. 14 - Prob. 3PCh. 14 - Prob. 4PCh. 14 - Prob. 5PCh. 14 - Prob. 6PCh. 14 - Prob. 7PCh. 14 - Prob. 8PCh. 14 - Prob. 9PCh. 14 - Prob. 10P
Ch. 14 - Prob. 11PCh. 14 - Prob. 12PCh. 14 - Prob. 13PCh. 14 - Prob. 14PCh. 14 - Prob. 15PCh. 14 - Prob. 16PCh. 14 - Prob. 17PCh. 14 - Prob. 18PCh. 14 - Prob. 19PCh. 14 - Prob. 20PCh. 14 - Prob. 21PCh. 14 - Prob. 22PCh. 14 - Prob. 23PCh. 14 - Prob. 24PCh. 14 - Prob. 25PCh. 14 - Prob. 26PCh. 14 - Prob. 27PCh. 14 - Prob. 28PCh. 14 - Prob. 29PCh. 14 - Prob. 30PCh. 14 - Prob. 31PCh. 14 - Prob. 32PCh. 14 - Prob. 33PCh. 14 - Prob. 34PCh. 14 - Prob. 35PCh. 14 - Prob. 36PCh. 14 - Prob. 37PCh. 14 - Prob. 38PCh. 14 - Prob. 39PCh. 14 - Prob. 40PCh. 14 - Prob. 41PCh. 14 - Prob. 42PCh. 14 - Prob. 43PCh. 14 - Prob. 44PCh. 14 - Prob. 45PCh. 14 - Prob. 46PCh. 14 - Prob. 47PCh. 14 - Prob. 48PCh. 14 - Prob. 49PCh. 14 - Prob. 1STCh. 14 - Prob. 2STCh. 14 - Prob. 3ST
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