
(a)
Calculate the equivalent annual worth.
(a)

Explanation of Solution
Table -1 shows the cash flow of different models.
Table -1
Models | 1 | 2 |
Price (P) | -30,000 | -2,000 |
AOC (MO) per year | -1,000 | -150 |
Salvage value (SV) | 8,000 | |
Number of pallet (PA) | 500 | 800 |
Cost per pallet (CP) | -10 | -10 |
Wage (W) | -32,000 | -55,000 |
Time period (n) | 12 | 4 |
Interest (i) | 8% | 8% |
Pallets are purchased every 2 years once.
The equivalent annual worth of project 1 (AW1) can be calculated as follows:
The annual worth of the project 1 is -$39,363.03.
Number of electric pallet mover (N) is 2. The equivalent annual worth of project 2 (AW2) can be calculated as follows:
The annual worth of the project 2 is -$38,699.56.
Since the annual worth of the project 1 is greater than the project 2, select the project 1.
(b)
Calculate the annual worth using spreadsheet.
(b)

Explanation of Solution
The annual worth of the project 1 and 2 is calculated by using spreadsheet as follows:
Since the annual worth of the project 1 (Forklift) is greater than the project 2 (Walkies), select the project 1.
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Chapter 6 Solutions
ENGINEERING ECONOMY(LOOSELEAF)
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