Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 31P
To determine
Calculate the cost per mile.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A company is currently paying its employees$0.56 per mile to drive their own cars on companybusiness. The company is considering supplyingemployees with cars, which would involve purchasing at $25,000 with an estimated three-year life, a netsalvage value of $8,000, taxes and insurance at a costof $1,200 per year, and operating and maintenanceexpenses of $0.30 per mile. If the interest rate is 10%and the company anticipates an employee’s annualtravel to be 30,000 miles, what is the equivalent costper mile (neglecting income taxes)
An integrated, combined cycle power plant produces 290 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 15 years. Additionally, the plant will operate at full capacity 74% of the time (downtime is 26% of
any given year). The MARR is 5% per year.
a. If this plant will make a profit of three 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?
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 is
Chapter 6 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Consider the cash flows in Table P6.7 for the...Ch. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - The repeating cash flows for a certain project are...
Ch. 6 - Beginning next year, a foundation will support an...Ch. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Prob. 17PCh. 6 - Prob. 18PCh. 6 - The Geo-Star Manufacturing Company is considering...Ch. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - Prob. 23PCh. 6 - Prob. 24PCh. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Prob. 28PCh. 6 - Prob. 29PCh. 6 - Prob. 30PCh. 6 - Prob. 31PCh. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Prob. 34PCh. 6 - Prob. 35PCh. 6 - Prob. 36PCh. 6 - Prob. 37PCh. 6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42PCh. 6 - Prob. 43PCh. 6 - Prob. 44PCh. 6 - Prob. 45PCh. 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. 1STCh. 6 - Prob. 2STCh. 6 - Prob. 3STCh. 6 - Prob. 4ST
Knowledge Booster
Similar questions
- An 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_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_forwardNet present value (NPV) of the project =Single payoff x PVIAF (10.20%, 9 years) - initial outlay = $6,947 x 0.42340 - $2,182 = $759.39 What's the equation for the bolded item?arrow_forward
- You are about to buy a piece of equipment (machine Alpha) for a project. The initial cost is $500,000 and the annual maintenance costs is $15,000. Another company offers you a second option (Machine Beta) for which the annual maintenance cost is $20,000. What is the maximum price (the initial cost) you would be willing to pay for the second option? Both machines have the same useful life of 11 years and the difference between their performances is negligible. Assume an annual interest rate of 4%. $767,524 $667,197 $456,197 $567,524arrow_forwardA new trailer worth $17,500 is purchased and it's expected that the salvage value after 10 years will be $750. If the interest rate is 4%, what equation would be appropriate to use to determine the Expected Uniform Annual Cost (EUAC)? O A = P(A/P, i, n) - F(P/F, i, n) O A = P(A/P, i, n) - F/n %3D O A -P+F O A - PIA/P, i, n) - F(A/F, i, n)arrow_forwardQuestion 4 Consider a proposal to enhance production of tortillas en a taqueria. The new machine is estimated to cost $30 million and will incur an additional $1 million per year in maintenance costs. The machine will produce annual savings of $6 million each year. The Minimum acceptable rate of return (MARR) is 11% per year, and the study period is five years at which time the machine will be obsolete (worthless). What is the maximum (minimum) value of maintenance cost that reverse your decision? Write 4 decimalsarrow_forward
- A car is needed for three years. Plans A and B for acquiring the car are being evaluated. An effective annual interest rate of 10% is to be used. Which plan is economically superior? Plan A: Lease the car for $0.25/mile (all inclusive) Plan B: Purchase the car for $30,000. Keep the car for three years. Sell the car after three years for $7200. Pay $0.14 per mile for oil and gas. Pay other costs of $500 per year.arrow_forwardPlease give handwritten solution!!arrow_forwardNissan is advertising a 24-month lease on the all-electric Leaf for $190 payable at the beginning of each month. The lease requires a $2000 down payment plus the first months payment on signing. No security deposit is required. The lessee pays for maintenance, excess wear and tear, and $0.18 per mile over 12,000 miles per year. Lease end purchase option is $17500 and lease payments total $4560. A disposition fee of $350 is due at the end of the lease period. Assuming an interest rate of 6% compounded monthly, what is the total cost of leasing if you put 40,000 miles at the end of lease?arrow_forward
- . A construction company is considering two possibilities for warehouse operations. Proposal 1 would require the purchase of a forklift for $5,000 and 500 pallets that cost $5 each. The average life of a pallet is assumed to be 2 years. If the forklift is purchased, the company must hire an operator for $9,000 annually and spend $600 per year on maintenance and operation. The life of the forklift is expected to be 12 years with a $700 salvage value. Alternatively, proposal 2 requires that the company hire 2 men to operate power driven hand trucks at a cost of $7,500 per man. One hand truck will be required at a cost of $900. The hand truck will have a life of 6 years with no salvage value. If the company's minimum attractive rate of return is 12%, which alternative should be selected? Use the annual equivalent method.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_forwardYour company is considering the introduction of a new product line. The initial investment required for this project is $500,000, and annual maintenance costs are anticipated to be $45,000. Annual operating costs will be directly proportional to the level of production at $8.50 per unit, and each unit of product can be sold for $65. If the MARR is 15% and the project has a life of 5 years, what is the minimum annual production level for which the project is economically viable? The equipment can be sold for $80,000 at the end of five years.arrow_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