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 3ST

(a):

To determine

Calculate the annual cost.

(b):

To determine

Calculate the unit cost.

(c):

To determine

Selection of alternate.

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The Riteway Ad Agency provides cars for its sales staff. Its present fleet of cars is three years old and will be sold very shortly. To provide a replacement fleet, the company is considering two alternatives: Purchase alternative: The company can purchase the cars and sell them in three years. Ten cars would be purchased for $15,000 each. If this alternative is chosen, the entire fleet will incur the following costs: Annual cost of servicing, taxes, and licensing $ 3,100 Repairs, first year $ 1,000 Repairs, second year $ 3,500 $ 5,500 Repairs, third year At the end of three years, the fleet could be sold for one-half of the original purchase price. Lease alternative: The company can lease the cars under a three-year lease contract costing $50,000 per year (the first payment due at the end of Year 1). As part of this lease agreement, the owner would provide all servicing and repairs, license the cars, and pay the taxes. Riteway would make a $10,500 security deposit at the beginning of…
Maintenance money for an athletic complex has been sought. Mr.​ Kendall, the Athletic​ Director, would like to solicit a donation to cover all future expected maintenance costs for the building. These maintenance costs are expected to be ​$1.4 million each year for the first five​ years, ​$1.7 million each year for years 6 through​ 10, and ​$ million each year after that.​ (The building has an indefinite service​ life.) If the money is placed in an account that will pay ​5% interest compounded​ annually, how large should the gift​ be?   The gift should be $_____million.​ (Round to two decimal​ places.)
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