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
Videos
Textbook Question
Chapter 6, Problem 13P
The alternatives for an engineering project to recover most of the energy presently being lost in the primary cooling stage of a chemical processing system have been reduced to three designs. The estimated capital investment amounts and annual expense savings are as follows:
Assume that the MARR is 12% per year, the study period is six years, and the market value is zero for all three designs.
a After year one, the annual savings are estimated to increase at the rate of 6% per year.
b After year one, the annual savings are estimated to increase $150 per year.
c Uniform sequence of annual savings.
Apply an incremental analysis method to determine the preferred alternative. (6.4)
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Avian Air Cargo is considering an investment of $10,000,000 with life expectancy of 10 years and annual operating cost of $400,000 in Year 1 with an
$50,000 per year starting in Year 2 through the life of the project. Avian Air Cargo anticipates a revenue stream of $2,500,000 per year for 20 years I
12%, what is the rate of return for this project and is it economically justified?
It is NOT economically justified because the rate of return is between 14% and 15%.
It IS economically justified because the rate of return is between 10% and 11%.
It is NOT economically justified because the rate of return is between 10% and 11%.
It IS economically justified because the rate of return is between 14% and 15%
of
MARR
Advanced Modular Technology (AMT) makes energy cleaner, safer, more secure and more
efficient. It typically exhibits net annual revenues that increase over a fairly long period. In
the long run, an AMT project may be profitable as measured by IRR, but its simple payback
period may be unacceptable. Evaluate this AMT project using the IRR method when the
company MARR is 13% per year and its maximum allowable payback period is two years.
What is your recommendation?
$98,000
$2,000 +
Capital investment at time 0
Net revenues in year k
$10,000 • (k- 1)
$9,000
Market (salvage) value
Life
4 years
7.
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- A large lithium-ion phosphate battery pack for an industrial application is expected to save $20,000 in annual energy expenses over its six-year life. For a three-year simple payback period, the permissible capital investment is $60,000. What is the internal rate of return on this $60,000 battery pack if it has a residual value of $10,000 at the end of six years? The MARR is 18% per year.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_forwardSolve without using excel please.arrow_forward
- A tunnel to transport water initially cost $1,000,000 and has expected maintenance costs that will occur in a 6-year cycle as shown below, assume MARR is 10% per year. End of Year: 3 Maintenance: $35,000 $35,000 $35,000 $45,000 $45,000 $60,000 Compute the Equivalent Annual Cost of the maintenance. Hint: Don't insert the negative sign Compute the Capitalized Cost? Hint: Don't insert the negative signarrow_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 cost of a biomedical image scanning machine is 95000 with an estimated annual maintenance cost of $4500 and an overhauling cost of 3000 in year 6. The machine is projected to save $25000 in direct labor cost annually. Biomedical Analytics Inc. the company who purchased the machine plans to sell it 10 years from now at a price of $35000. a) Draw the cash flow diagram b) Determine the Rate of Return (ROR) if staring with two initial guesses of 18% and 20% Hints: Profit= R-TC Profit = rQ-(FC+ v Q = Annual Quantityarrow_forward
- Two electric motors (A and B) are being considered to drive a centrifugal pump. Each motor is capable of delivering 40 horsepower (output) to the pumping operation. It is expected that the motors will be in use 800 hours per year. If electricity costs $0.08 per kilowatt-hour and 1 hp = 0.746 kW, which motor should be selected if MARR = 6% per year? Refer to the data below. The AW for Motor A is $ Initial Cost Electrical Efficiency Annual Maintenance 5 years Click the icon to view the interest and annuity table for discrete compounding when the MARR is 6% per year. (Round to the nearest dollar.) Motor A $1,700 0.75 $50 Life Motor B $900 0.55 $80 5 yearsarrow_forwardCapital 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% □arrow_forwardPlease do not give solution in image formate thanku. Biomet Implants is planning new online patient diagnostics for surgeons while they operate. The new system will cost $300,000 to install in an operating room, $5000 annually for maintenance, and have an expected life of 10 years. The revenue per system is estimated to be $80,000 in year 1 and to increase by $10,000 per year through year 10. a) Determine NPV to see if the project is economically justified using PW analysis and an MARR of 10% per year. b) Insert a Triangle distribution with minimum at $8000, average 10,000 and maximum at 12000 as the input distribution for the revenue increase. Perform Monte Carlo Simulation and discuss the results.arrow_forward
- Brown Corporation recently purchased a new machine for $339,013.20 with a ten-year life. The old equipment has a remaining life of ten years and no disposal value at the time of replacement. Net cash flows will be $60,000 per year. What is the internal rate of return?A) 12%B) 16%C) 20%D) 24%arrow_forwardSolve using FW method and INCREMENTAL ANALYSIS. Show cash flow diagram and complete solution. The estimated capital investment and the annual expenses) for four alternativedesigns of a diesel-powered air compressor are shown below, as well as theestimated market value for each design at the end of the common five-year usefullife. The study period is five years, and the MARR is 10% per year. One of thedesigns must be selected for the compressor, and each design provides the same levelof service. On the basis of this information,- Show that the FW method (i = MARR), using the incremental analysis procedure.arrow_forwardA manufacturer of automated optical inspection (AOI) devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the ERR method to determine which alternative should be selected if the reinvestment rate equals the company's MARR of 4% per year. Assume you already know that the ERR of Alternative M is 4.11%. Alternative Initial costs Net annual cash flow Life, years M N $30,000 $45,000 $4,500 $7,000 8 8arrow_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
Valuation Analysis in Project Finance Models - DCF & IRR; Author: Financial modeling;https://www.youtube.com/watch?v=xDlQPJaFtCw;License: Standard Youtube License