Contemporary Engineering Economics (6th Edition)
Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 6, Problem 32P
To determine

Calculate the cost per mile.

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Problem 06.008 Annual Worth and Capital Recovery Calculations White Oaks Properties builds strip shopping centers and small malls. The company plans to replace its refrigeration, cooking, and HVAC equipment with newer models in one entire center built 11 years ago. 11 years ago, the original purchase price of the equipment was $750,000 and the operating cost has averaged $240,000 per year. Determine the equivalent annual cost of the equipment if the company can now sell it for $234,000. The company's MARR is 19% per year. The equivalent annual cost of the equipment is determined to be $ 399506.4
A large city in the mid-West needs to acquire a street-cleaning machine to keep its roads looking nice year-round. A used cleaning vehicle will cost $85,000 and have a $20,000 market (salvage) value at the end of its five-year life. A new system with advanced features will cost $150,000 and have a $40,000 market value at the end of its five-year life. The new system is expected to reduce labor hours compared with the used system. Current street-cleaning activity requires the used system to operate 8 hours per day for 20 days per month. Labor costs $50 per hour (including fringe benefits), and MARR is 12% per year.The best estimate for the reduction of labor hours for the new system is 17% (compared with the used system). Investigate how sensitive the decision is to (a) changes in the MARR, (b) changes in the market value of the new system, and (c) the productivity improvement of the new system. Graph your results. Hint: Think incrementally!
A 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%.
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