ENGINEERING ECONOMIC ENHANCED EBOOK
14th Edition
ISBN: 9780190931940
Author: NEWNAN
Publisher: OXF
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Chapter 9, Problem 32P
To determine
The best story building with MARR of
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2. Three mutually exclusive design alternatives are being considered. The estimated sales and cost data for each alternative have been tabulated. The MARR is 20 per year. Annual revenues are based on the number of units sold and the selling price. Annual expenses are based on fixed and variable costs. Determine which selection is preferable based on F W. Confirm your selection by separately checking is preferable using PW. A B Cc Investment cost S 30 000 S 60 000 50 000 Est. units sold year 15 000 20 000 18 000 Unit selling price S 3.50 4.40 4.10 Unit variable cost S 1.00 1.40 1.15 Fixed annual expenses S 15 000 S 30 000 S 26 000 Market value 0 S 20 000 15 000 Useful life 10 yrs 10 yrs 10 yrs
The estimated negative cash flows for three design alternatives are shown below. The MARR is 10% per year and the study period is four years.
Which alternative is best based on the IRR method? Doing nothing is not an option.
Capital
investment
Annual expenses
OA. Alternative B
OB. Alternative C
OC. Alternative A
EOY
0
1-4
A
$85,700
8,500
Alternative
B
$64,500
Which alternative would you choose as a base one? Choose the correct answer below.
15,150
C
$71,900
12,450
Chapter 9 Solutions
ENGINEERING ECONOMIC ENHANCED EBOOK
Ch. 9 - Prob. 2QTCCh. 9 - Prob. 3QTCCh. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - Prob. 8P
Ch. 9 - Prob. 9PCh. 9 - Prob. 10PCh. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - Prob. 13PCh. 9 - Prob. 14PCh. 9 - Prob. 15PCh. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 21PCh. 9 - Prob. 22PCh. 9 - Prob. 23PCh. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Prob. 27PCh. 9 - Prob. 28PCh. 9 - Prob. 29PCh. 9 - Prob. 30PCh. 9 - Prob. 31PCh. 9 - Prob. 32PCh. 9 - Prob. 33PCh. 9 - Prob. 34PCh. 9 - Prob. 35PCh. 9 - Prob. 36PCh. 9 - Prob. 37PCh. 9 - Prob. 38PCh. 9 - Prob. 39PCh. 9 - Prob. 40PCh. 9 - Prob. 41PCh. 9 - Prob. 42PCh. 9 - Prob. 43PCh. 9 - Prob. 44PCh. 9 - Prob. 45PCh. 9 - Prob. 46PCh. 9 - Prob. 47PCh. 9 - Prob. 48PCh. 9 - Prob. 49PCh. 9 - Prob. 50PCh. 9 - Prob. 51PCh. 9 - Prob. 52PCh. 9 - Prob. 53PCh. 9 - Prob. 54PCh. 9 - Prob. 55PCh. 9 - Prob. 56PCh. 9 - Prob. 57PCh. 9 - Prob. 58PCh. 9 - Prob. 59PCh. 9 - Prob. 60PCh. 9 - Prob. 61PCh. 9 - Prob. 62PCh. 9 - Prob. 63PCh. 9 - Prob. 64PCh. 9 - Prob. 65PCh. 9 - Prob. 66PCh. 9 - Prob. 67PCh. 9 - Prob. 68PCh. 9 - Prob. 69PCh. 9 - Prob. 70PCh. 9 - Prob. 71PCh. 9 - Prob. 72PCh. 9 - Prob. 73PCh. 9 - Prob. 74PCh. 9 - Prob. 75PCh. 9 - Prob. 77PCh. 9 - Prob. 78PCh. 9 - Prob. 79PCh. 9 - Prob. 80PCh. 9 - Prob. 81PCh. 9 - Prob. 83PCh. 9 - Prob. 84PCh. 9 - Prob. 85PCh. 9 - Prob. 86PCh. 9 - Prob. 87PCh. 9 - Prob. 88P
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- Plz fast.arrow_forwardTwo mutually exclusive alternatives are being considered for company's use. One of these alternatives must be selected. The firm's MARR is 20% per year. The estimated cash flows for each alternative are as follows: Alternative 1 Alternative 2 Capital investment Annual expenses Useful life(years) Market value(at end of useful life) $20,000 5,500 $38,000 4,000 5 10 $1.000 $4.200 Which equipment alternative should be selected using NPW-C with a study period of 10 years? Assume the study period is shortened to five years. Which alternative would you recommend using NPW-C?arrow_forwardThe Gadomski School of Engineering is considering the purchase of a new plasma cutter for the St. Benilde Laboratory Building. Economic data for three potential cutters are shown in the table below. Using a MARR of 8% per year, determine which plasma cutter should be selected. Compute all relevant internal rate of return values to two decimal places. Show all of your work! Hypertherm $1,875 $900 $375 Manufacturer Miller Tomahawk $2,850 $1,000 $325 12 $1,200 $450 $400 4 Initial Cost Salvage Value Annual Cost Life, years 6.arrow_forward
- When comparing multiple alternatives, the DPBP can lead to wrong conclusions regarding the maximum economic worth. True or False?arrow_forwardIf mutually exclusive projects with normal cash flows are being analyzed, the net present value (NPV) and internal rate of return (IRR) methods always agree. Projects Y and Z are mutually exclusive projects. Their cash flows and NPV profiles are shown as follows. Year Project Y Project Z 0 -$1,500 -$1,500 1 $200 $900 2 $400 $600 3 $600 $300 4 $1,000 $200 NPV (Dollars) 800 600 Project Y 400 Project Z 200 -200 0246 8 10 12 14 16 18 20 COST OF CAPITAL (Percent) If the weighted average cost of capital (WACC) for each project is 14%, do the NPV and IRR methods agree or conflict? O The methods agree. O The methods conflict.arrow_forwardNonearrow_forward
- Question 1: Two mutually exclusive electricity generators are considered for purchase by XYZ company. Information relevant to compare the alternatives are summarized below. Which one should be selected for purchase using IRR method? The MARR is 10% per year. Generator A Generator B 100,000 Capital Investment (OMR) Market value at the 80,000 35,000 10,000 end of useful life (OMR) Annual fuel and 3,000 5,000 maintenance expenses (OMR) Service life 10 years 10 years Hints: You should solve using IRR only. Your answers should be presented in Wing a form of a Table. Show the iteration and interpolation procedure presented inarrow_forwardFor FW Method, if FW (i = MARR) = −30, then the project is economically _____________. justified barely justified sometimes justified unjustified nonearrow_forwardAcme Tools has four alternatives for an injection molding machine (A, B, C, D) as shown below. MARR is 20%. Use incremental cash flow analysis to determine the economically optimal system. Solve this problem in Excel, copy and paste the Excel model below, and provide an interpretation. A B C D Capital Investment $295,000 $350,000 $310,000 $340,000 Net Annual Revenue $75,000 $90,000 $75,000 $85,000 Residual Value $60,000 $82,000 $96,000 $85,000 Study Period 6 Years 6 Years 6 Years 6 Yearsarrow_forward
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