Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 6, Problem 9P
To determine
Calculate the annual worth.
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A company is considering investing $17,500 in a heat exchanger. The heat exchanger will last five vears, at which time it will be sold for $2.000, The maintenance cost at the end of the first vear is estimated to be $1.500.
Maintenance costs for the exchanger are estimated to increase by $1,000 per year over its life. As an alternative, the company may lease the equipment for $X per year, including maintenance, with the annual payments to made
at the end of each year.
a. Choose cash flow diagrams of both alternatives
b. For what value of X should the company lease the heat exchanger? The company expects to earn 8% on its investments. Assume end-of-year lease payments.
Click the icon to view the interest and annuity table for discrete compounding when i= 8% per year.
EOY
EOY
$2,000
2
3
4
5
2
$1,500 $1,500 $1,500 $1,500 $1,500
$1,500
$2,500
$3.500
$4,500
$5,500
$17,500
$17,500
OD.
C.
EOY
$2,000
EOY
$2,000
1
2
3
5
2.
$1,500
$2,500
$3,500
$4,500
$5.500 $4.500 $3.500 $2,500 $1,500
$5,500…
A company is considering investing $17,500 in a heat exchanger. The heat exchanger will last five years, at which time it will be sold for $2,000. The maintenance cost at the end of the first year is estimated to be $1,500.
Maintenance costs for the exchanger are estimated to increase by $1,000 per year over its life. As an alternative, the company may lease the equipment for $X per year, including maintenance, with the annual payments to made
at the end of each year.
a. Choose cash flow diagrams of both alternatives.
b. For what value of X should the company lease the heat exchanger? The company expects to earn 8% on its investments. Assume end-of-year lease payments.
Click the icon to view the interest and annuity table for discrete compounding when i= 8% per year.
$1,500 $1,500 $1,500 $1,500 $1,500
$1,500
$2,500
$3,500
$4,500
$5,500
$17,500
$17,500
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
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