Engineering Economy (16th Edition) - Standalone book
16th Edition
ISBN: 9780133439274
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Textbook Question
Chapter 6, Problem 10P
Consider the following cash flows for two mutually exclusive alternatives. Which one should be recommended? The MARR is 25% per year.
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A new biomaterial used for prosthetic devices was developed by engineers in the laboratory that requires production equipment to start manufacturing. Two different equipment are considered. Equipment A will have an initial cost of $125,000 and annual cost of $55,000. Equipment B will have an initial cost of $175,000 and an annual cost of $35,000. For 20% MARR which process should be selected. What is the incremental rate of return?
Capital Investment
Annual Revenues
Annual Expenses
MV at end of useful life
Useful Life
IRR
Alternative 1
$16,000
$7,000
$2,400
$1,600
4 years
9.1%
Alternative 2
$23,000
$13,000
$5,000
$600
12 years
33.7%
□
Nadine Chelesvig has patented her invention. She is offering a potential manufacturer two contracts for the exclusive right to
manufacture and market her product. Plan A calls for an immediate single lump sum payment to her of $105,000. Plan B calls for an
annual payment of $9,000 plus a royalty of $1.00 per unit sold. The remaining life of the patent is 10 years. Nadine uses a MARR of
10%/year. What must be the uniform annual sales volume of the product for Nadine to be indifferent between the contracts, based on
an annual worth analysis?
units
Carry all interim calculations to 5 decimal places and then round your final answer to the nearest unit. The tolerance is ±10.
Chapter 6 Solutions
Engineering Economy (16th Edition) - Standalone book
Ch. 6 - Prob. 1PCh. 6 - The Consolidated Oil Company must install...Ch. 6 - Prob. 3PCh. 6 - Three mutually exclusive design alternatives are...Ch. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Fiesta Foundry is considering a new furnace that...Ch. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - Consider the following cash flows for two mutually...
Ch. 6 - Prob. 11PCh. 6 - Prob. 12PCh. 6 - The alternatives for an engineering project to...Ch. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Refer to the situation in Problem 6-16. Most...Ch. 6 - Prob. 18PCh. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - Prob. 23PCh. 6 - Prob. 24PCh. 6 - Prob. 25PCh. 6 - In the Rawhide Company (a leather products...Ch. 6 - Refer to Problem 6-2. Solve this problem using the...Ch. 6 - Prob. 28PCh. 6 - Prob. 29PCh. 6 - Prob. 30PCh. 6 - Prob. 31PCh. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Potable water is in short supply in many...Ch. 6 - Prob. 35PCh. 6 - Prob. 36PCh. 6 - In the design of a special-use structure, two...Ch. 6 - Prob. 38PCh. 6 - a. Compare the probable part cost from Machine A...Ch. 6 - Prob. 40PCh. 6 - Two mutually exclusive alternatives are being...Ch. 6 - Prob. 42PCh. 6 - IBM is considering an environmentally conscious...Ch. 6 - Three mutually exclusive earth-moving pieces of...Ch. 6 - A piece of production equipment is to be replaced...Ch. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 51PCh. 6 - Prob. 52PCh. 6 - Prob. 53PCh. 6 - Prob. 54PCh. 6 - Prob. 55PCh. 6 - Prob. 56PCh. 6 - Prob. 57PCh. 6 - Prob. 58PCh. 6 - Prob. 59PCh. 6 - Prob. 60PCh. 6 - Prob. 61PCh. 6 - Prob. 62PCh. 6 - Prob. 63PCh. 6 - Prob. 64PCh. 6 - Prob. 65PCh. 6 - Prob. 66PCh. 6 - Three models of baseball bats will be manufactured...Ch. 6 - Refer to Example 6-3. Re-evaluate the recommended...Ch. 6 - Prob. 69SECh. 6 - Prob. 70SECh. 6 - Prob. 71SECh. 6 - Prob. 72CSCh. 6 - Prob. 73CSCh. 6 - Prob. 74CSCh. 6 - Prob. 75FECh. 6 - Prob. 76FECh. 6 - Prob. 77FECh. 6 - Complete the following analysis of cost...Ch. 6 - Prob. 79FECh. 6 - For the following table, assume a MARR of 10% per...Ch. 6 - Prob. 81FECh. 6 - Problems 6-82 through 6-85. (6.4) Table P6-82 Data...Ch. 6 - Prob. 83FECh. 6 - Problems 6-82 through 6-85. (6.4) Table P6-82 Data...Ch. 6 - Problems 6-82 through 6-85. (6.4) Table P6-82 Data...Ch. 6 - Consider the mutually exclusive alternatives given...Ch. 6 - Prob. 87FE
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- Nadine Chelesvig has patented her invention. She is offering a potential manufacturer two contracts for the exclusive right to manufacture and market her product. Plan A calls for an immediate single lump sum payment to her of $170,000. Plan B calls for an annual payment of $14,000 plus a royalty of $1.60 per unit sold. The remaining life of the patent is 10 years. Nadine uses a MARR of 10%/year. What must be the uniform annual sales volume of the product for Nadine to be indifferent between the contracts, based on an annual worth analysis? unitsarrow_forwardAn industrial coal-fired boiler for process steam is equipped with a 10-year-old electrostatic precipitator (ESP). Changes in coal quality have caused stack emissions to be in noncompliance with federal standards for particulates. Two mutually exclusive alternatives have been proposed to rectify this problem (doing nothing is not an option). The MARR is 9% per year. Make a recommendation regarding which alternative to select. 3. An industrial coal-fired boiler for process steam is equipped with a 10-year-old electrostatic precipitator (ESP). Changes in coal quality have caused stack emissions to be in noncompliance with federal standards for particulates. Two mutually exclusive alternatives have been proposed to rectify this problem (doing nothing is not an option). Capital investment Annual operating expenses Useful Life New Baghouse $1,140,000 $115,500 10 years New ESP $992,500 $73,200 10 years The MARR is 9% per year. Make a recommendation regarding which alternative to select.arrow_forwardA large textile company is trying to decide among three alternatives of sludge dewatering g, processes. The costs associated with these alternatives are shown below. Alternative Y will need an upgrade of $9700 at the end of year 2. At the end of year 2, alternative Z would be replaced with another alternative Z having the same installed and operating costs. If the MARR is 14% per year, which alternative should be chosen? \table[[Alternative,x,Y,Z 6) A large textile company is trying to decide among three alternatives of sludge dewatering processes. The costs associated with these alternatives are shown below. Alternative Y will need an upgrade of $9700 at the end of year 2. At the end of year 2, alternative Z would be replaced with another alternative Z having the same installed and operating costs. If the MARR is 14% per year, which alternative should be chosen? Alternative X Y Z Installed costs $68,500 $48,500 $33,500 Annual operating costs. $6000 $4000 $5000 Overhaul cost in year 2…arrow_forward
- Fairmont Industries primarily relies on 100% equity financing to fund projects. A goodopportunity is available that will require $250,000 in capital. The Fairmont owner can supply themoney from personal investments that currently earn an average of 8.5% per year. The annualnet cash flow from the project is estimated at $30,000 for the next 15 years. Alternatively, 60%of the required amount can be borrowed for 15 years at 9% per year. If the MARR is the WACC,determine which plan, if either is better. This is a before-tax analysisarrow_forwardhelp please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all workingarrow_forward8arrow_forward
- 2. Vista Land build shopping centers. The company plans to replace its air-conditioning unit ruth newer models in one entire center built 9 years ago. The original purchase price of the equipment was Php 700,000 nine years ago and the operating cost has averaged Php 250,000 per year. Determine the equivalent annual cost of the equipment if the company can now sell it for Php 180,000. She company's MARR Is 25% per year.arrow_forwardAlternative A and B are two mutually exclusive cost alternatives, and one of them must be selected. Using Incremental Analysis, which of the alternatives should be recommended based on ERR (the External Rate of Return)? · MARR (Minimum acceptable rate of return) is 12% per year while the re-investment rate is 10% per year. The study period is 20 years. Assume repeatability is appropriate for this comparison. Alternative A B $ (101,000) $ (6,000) 20 years $ (6,000) $ (18,500 ) 10 years Initial capital investment Annual operating expenses Useful life Salvage value None Nonearrow_forwardWhy is it okay to use Incremental IRR between two same life projects that has different first cost and annual cash flow even when MARR is not given / stated ?arrow_forward
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