An old, heavily used warehouse currently has an incandescent lighting system. The lights run essentially 24 hr/day, 365 days/yr and draw about 10 kW of power. Consideration is being given to replacing these lights with fluorescent lights to save on electricity. It is estimated that the same level of lighting can be achieved with 4.5 kW of fluorescent lights. Replacement of the lights will cost about $11,000. Bulb replacement and other maintenance are not expected to be significantly different. Electricity for the lights currently costs $0.045/kWh. The warehouse is scheduled for demolition in five years to make way for a more modern facility. The company has a MARR of 15%. Should the company replace the incandescent lights with fluorescent lights? State any assumptions you make. (6.4)
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Engineering Economy (17th Edition)
- Please use a financial calculator to solve. Be sure to list your steps. You are evaluating two different silicon wafer milling machines. The Techron I costs $237,000, has a three-year life, and has pretax operating costs of $62, 000 per year. The Techron II costs $ 415,000, has a five - year life, and has pretax operating costs of $ 35,000 per year. For both milling machines, use straight - line depreciation to zero over the project's life and assume a salvage value of $39, 000. If your tax rate is 21 percent and your discount rate is 8 percent, compute the EAC for both machines. (Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)arrow_forwardFor a motor to operate a pump, a design engineer must choose the horsepower. Horsepower rating is a design characteristic that can vary from 10 to 40 horsepower. The motor will cost $120 per year to operate, plus $0.60 per horsepower. The running expenses of such motors will be $0.055 per horsepower-hour divided by the horsepower rating. Each year, 9,000 horsepower-hours will be required. Determine how much horsepower should be supplied to keep the overall yearly cost to a minimal. Demonstrate that your entire cost each year has been reduced.arrow_forwardThe maintenance of a machine in a manufacturing plant currently costs a company $8,000 every year (paid at the end of each year) with the cost increasing by $1,000 each subsequent year. Because of this, the plant manager is considering replacing this machine with a newer one which would cost $20,000 to purchase today, and then $4,000/year increasing by $30Ó in each year to maintain (also paid at the end of the year). If the company's MARR is at 8% per year compounded annually, what would be the discounted payback period (in years) for this proposed investment? 4 6. 7arrow_forward
- An integrated, combined cycle power plant produces 285 MW of electricity by gasifying coal. The capital investment for the plant is $450 million, spread evenly over two years. The operating life of the plant is expected to be 18 years. Additionally, the plant will operate at full capacity 76% of the time (downtime is 24% of any given year). The MARR is 10% per year. a. If this plant will make a profit of two cents per kilowatt-hour of electricity sold to the power grid, what is the simple payback period of the plant? Is it a low-risk venture? b. What is the IRR for the plant? Is it profitable? a. The simple payback period of the plant is years. (Round up to one decimal place.) It's a venture. b. The IRR for the plant is%. (Round to one decimal place.) The plant isarrow_forwardA machine cost $315,000 to purchase. Fuel, oil, grease, and minor maintenance are estimated to cost $53.50 per operating hour. A set of tires cost $16,000 to replace, and their estimated life is 3,100 use hours. A $17,000 major repair will probably be required after 6,200 hr of use. The machine is expected to last for 9,300 hr, after which it will be sold at a price (salvage value) equal to 13% of the original purchase price. A final set of new tires will not be purchased before the sale. How much should the owner of the machine charge per hour of use, if it is expected that the machine will operate 3,100 hr per year? The company's cost-of-capital rate is 7.25%.arrow_forwardWhat would be the annual worth on this investment?arrow_forward
- Brawdy Plastics, Inc., produces plastic seat belt retainers for General Motors at their plant in Buffalo, New York. After final assembly and painting, the parts are placed on a conveyor belt that moves the parts past a final inspection station. How fast the parts move past the final inspection station depends upon the line speed of the conveyor belt (feet per minute). Although faster line speeds are desirable, management is concerned that increasing the line speed too much may not provide enough time for inspectors to identify which parts are actually defective. To test this theory, Brawdy Plastics conducted an experiment in which the same batch of parts, with a known number of defective parts, was inspected using a variety of line speeds. The following data were collected. Excel file: data14-05.xlsx Number of Line Defective Speed Parts Found 20 23 20 21 30 19 30 16 40 15 40 17 50 14 50 11 If required onterarrow_forwardSuppose 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_forwardAn integrated, combined cycle power plant produces 295 MW of electricity by gasifying coal. The capital investment for the plant is $450 million, spread evenly over two years. The operating life of the plant is expected to be 15 years. Additionally, the plant will operate at full capacity 72% of the time (downtime is 28% of any given year). The MARR is 8% per year. a. If this plant will make a profit of two cents per kilowatt-hour of electricity sold to the power grid, what is the simple payback period of the plant? Is it a low-risk venture? b. What is the IRR for the plant? Is it profitable? a. The simple payback period of the plant is 12.1 years. (Round up to one decimal place.) It's a high-risk venture. b. The IRR for the plant is %. (Round to one decimal place.)arrow_forward
- An industrial firm is considering purchasingseveral programmable controllers and automatingthe company’s manufacturing operations. It is estimated that the equipment will initially cost $120,000,and the labor to install it will cost $25,000. A servicecontract to maintain the equipment will cost $5,000per year. Trained service personnel will have to behired at an annual salary of $50,000. Also estimatedis an approximate $10,000 annual income-tax savings (cash inflow). How much will this investment inequipment and services have to increase the annualrevenues after taxes in order to break even? Theequipment is estimated to have an operating life of10 years with no salvage value because of obsolescence. The firm’s MARR is 12%arrow_forwardAn integrated, combined cycle power plant produces 285 MW of electricity by gasifying coal. The capital investment for the plant is $530 million, spread evenly over two years. The operating life of the plant is expected to be 18 years. Additionally, the plant will operate at full capacity 76% of the time (downtime is 24% of any given year). The MARR is 7% per year. a. If this plant will make a profit of two cents per kilowatt-hour of electricity sold to the power grid, what is the simple payback period of the plant? Is it a low-risk venture? b. What is the IRR for the plant? Is it profitable? a. The simple payback period of the plant is 14 years. (Round up to one decimal place.) It's a high-risk venture. b. The IRR for the plant is %. (Round to one decimal place.) CHEarrow_forwardYour firm is thinking about investing $300,000 in the overhaul of a manufacturing cell in a lean environment. Revenues are expected to be $33,000 in year one and then increasing by $11,000 more each year thereafter. Relevant expenses will be $20,000 in year one and will increase by $10,000 per year until the end of the cell's seven-year life. Salvage recovery at the end of year seven is estimated to be $11,000. What is the annual equivalent worth of the manufacturing cell if the MARR is 8% per year? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 8% per year. The annual equivalent worth of the manufacturing cell is $. (Round to the nearest dollar.)arrow_forward
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