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 6, Problem 10P
To determine
Calculate the incremental present worth.
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Today (t=0), you invested the starting principal of $1234. At the end of the first, second, and third years, you will receive payment amounts of 40%, 45% and 50% respectively of your initital investment. The MARR is 6.78%. Calculate the MARR for an NPV between $0 and $1 and draw the cash flow diagram
Betty will need $12,000 in five years to pay for a major overhaul on her tractor engine. She has found an investment that will provide a 10% return on her invested funds. How much does Betty need to invest today so she will have her overhaul funds in five years?
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Suppose a friend of yours invests $100 each month in an individual retirement account (IRA) for a decade and earns an unbelievable APR of 12% a year (1% per month) on her investment. She will end up with $100 (F/A, 1%, 120) = $100 (230.0387) = $23,003.87 after 10 years. If you decide to invest $200 each month over 10 years, but can earn only a meager APR of 3% per year on it, roughly how much will you have accumulated after 10 years?Choose the closest answer. (a) $19,000 (b) $24,000 (c) $28,000 (d) $46,000.
Chapter 6 Solutions
Engineering Economy, Student Value Edition (17th Edition)
Ch. 6 - An oil refinery finds that it is necessary to...Ch. 6 - The Consolidated Oil Company must install...Ch. 6 - One of the mutually exclusive alternatives below...Ch. 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 - DuPont claims that its synthetic composites will...Ch. 6 - Prob. 10P
Ch. 6 - Which alternative in the table below should be...Ch. 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 - An old, heavily used warehouse currently has an...Ch. 6 - Prob. 19PCh. 6 - Two electric motors (A and B) are being considered...Ch. 6 - Two mutually exclusive design alternatives are...Ch. 6 - Pamela recently moved to Celebration, Florida, an...Ch. 6 - Environmentally conscious companies are looking...Ch. 6 - Prob. 24PCh. 6 - Two 100 horsepower motors are being considered for...Ch. 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 - Two electric motors are being considered to drive...Ch. 6 - Prob. 31PCh. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Potable water is in short supply in many...Ch. 6 - Three mutually exclusive investment alternatives...Ch. 6 - Prob. 36PCh. 6 - A companys MARR is 10% per year. Two mutually...Ch. 6 - Prob. 38PCh. 6 - a. Compare the probable part cost from Machine A...Ch. 6 - A one-mile section of a roadway in Florida has...Ch. 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 - Use the imputed market value technique to...Ch. 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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- You are considering two investment options. In option A, you have to invest RM5000 now and RM1000 three years from now, In option B, you have to invest RM2500 now, RM1500 a year from now, and RM1000 three years from now. In both options, you will receive four annual payments of RM2000 each. (You will get the first payment a year from now.) Which of these options would you choose based on (a) the conventional payback criterion, and (b) the present worth criterion, assuming 8% interest? Based on conventional payback period method, choose either (A/B/Both) Format: PW Option A Format : PW Option B Format : Format : Based on PW analysis method, choose Option (A or B)arrow_forwardDuPont claims that its synthetic composites will replace metals in the construction of future automobiles. “The fuel mileage will double,” saysDuPont. Suppose the light and stronger “composite automobile” will get 50 miles per gallon of gasoline, and the gasoline costs $3.50 per gallon. The anticipated life of the automobile is six years, i = 10% per year, and annual travel is 20,000 miles. The conventional car averages 25 miles per gallon. Solve, a. How much more expensive can the sticker price of the composite automobile be and still have it as an economical investment for a prospective auto buyer? State all important assumptions. b. What is the trade-off being made in Part (a)?arrow_forwardDuPont claims that its synthetic composites will replace metals in the construction of future automobiles. “The fuel mileage will double,” saysDuPont. Suppose the lighter and stronger “composite automobile” will get 50 miles per gallon of gasoline, and that gasoline costs $3.50 per gallon. The anticipated life of the automobile is six years, i = 10% per year, and annual travel is 20,000 miles. The conventional car averages 25 miles per gallon. Solve, a. How much more expensive can the sticker price of the composite automobile be and still have it as an economical investment for a prospective auto buyer? State all important assumptions. b. What is the trade-off being made in Part (a)?arrow_forward
- Suppose that you purchase a tractor for $170,000 and sell it in 10 years for $50,000. What is the annualized cost (capital recovery) if your required return on capital is 12%?arrow_forwardProblem #4 (3/10): Six mutually exclusive projects A, B, C, D, E, and F, are being considered by XYZ. They have been ordered by first costs so that project A has the lowest first cost, project F the largest. Detailed cash flows for Projects A and B are given below. (MARR is 10%) Project A: Initial Cost of $323,120. annual benefit of $50,000 for 15 years Project B: Initial Cost of $494,310. annual benefit of $70,000 for 15 years (a) Based on the cash flows and the MARR of 10%, what is the IRR for Project A? (b) Based on the cash flows, calculate the IRR for the increment from A to B. (c) The table below apply to all projects (A through F). The data can be interpreted as follows: the IRR on the incremental investment from project C to D is 13%.. Which project should be selected? IRR on Increments of Investment Project A BCDEF IRR on overall Investment ? 11% 11% 13% 19% 15% A ? 9% 11% 16% 10.5% B 11% 15% 16% 14% Compared with Project с 13% 14% 13% 9% 6% E 9.50%arrow_forwardANSWER: ERR (i %) = 23.71%arrow_forward
- 6-11. Compare two projects: Project A with an initial investment of $100,000 and returns of $30,000 per year for five years, and Project B with $135,000 initial investment and returns of $40,000 per year for five years. Which has a higher IRR? Which should be selected if the company MARR is 9% per year? (6.4)arrow_forwardA company purchase a piece of manufacturing equipment for an additional income. The expected income is $3,300 per semester. Its useful life is 9 years. Expenses are estimated to be $500 semiannually. If the purchase price is $44,000 and there is a salvage value of $4,500, what is the prospective rate of return (IRR) of this investment? The MARR is 10% compounded semiannually. Oa. IRR 6.02% semiannual Ob. IRR=4% semiannual Oc. IRR = 396 semiannual Od. IRR 6.23% semiannual =arrow_forwardAn aircraft hangar requires a new high-efficiency HVAC system for environmental control and reducing heating and cooling expenses. The cost of the HVAC system is $5.0 million, and the annual savings are expected to be $400,000. The useful life of the HVAC system is 20 years, and its residual value is zero. a) What is the simple payback period? b) What is the internal rate of return? (Note: You can use the tables in the book or Excel to find the IRR, but in either case show work and/or cut & paste a spreadsheet. If using the tables an approximate answer will be acceptable)arrow_forward
- Suppose that you have just completed the mechanical design of a high-speed automated palletizer that has an investment cost of $3,800,000. The existing palletizer is quite old and has no salvage value. The market value for the new palletizer is estimated to be $430,000 after nine years. One million pallets will be handled by the palletizer each year during the nine-year expected project life. What net savings per pallet (i.e., total savings less expenses) will have to be generated by the palletizer to justify this purchase in view of a MARR of 18% per year? Use the AW method. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 18% per year. The net savings required to be generated by the new palletizer to justify its purchase are $ per pallet (Round to the nearest cent)arrow_forwardYou have agreed to make investment in your friends agricultural farm. This would require an amount of $20,000 as initial investment on your part. Your friend promises you revenue (before expenses) of $3600 per year the first year and thereafter the revenue increases by $200 per year. Your share of the estimated annual expenses is $1000. You are planning to invest for six years. Your friend has made the commitment to buyout your share of the business at that time for $24000. You have decided to set a personal MARR of 15% per year. Judge the profitability of the investment project by using Future Worth (FW) method.arrow_forwardToday, you have $35,000 to invest. Two investment alternatives are available to you. One would require you to invest your $35,000 now; the other would require the $35,000 investment two years from now. In either case, the investments will end five years from now. The cash flows for each alternative are provided below. Using a MARR of 13%, what should you do with the $35,000 you have? Click the icon to view the alternatives description. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 13% per year. The FW of the Alternative 1 is $ (Round to the nearest dollar.) More Info Year OT N345 0 1 2 Alternative 1 - $35,000 $15,000 $15,000 $15,000 $13,000 $13,000 Alternative 2 $0 $0 - $35,000 $16,500 $16,500 $16,500 0 Xarrow_forward
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