ENGINEERING ECO ANALYSIS W/STUDY GUIDE
ENGINEERING ECO ANALYSIS W/STUDY GUIDE
13th Edition
ISBN: 9780190693053
Author: NEWNAN
Publisher: Oxford University Press
Question
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Chapter 9, Problem 75P
To determine

(a)

The resale value of alternative B to provide equal economical transportation.

Expert Solution
Check Mark

Answer to Problem 75P

The resale value of alternative B is $19.48 to provide equal economical transportation.

Explanation of Solution

Given:

For alternative A:

The initial cost is $8900.

The resale value is $1700.

The operation cost per kilometer is $0.09.

For alternative B:

The initial cost is $8900.

The operation cost per kilometer is $0.075.

The distance travelled by car is 12000km.

The interest rate is 8%.

The time period is 3years.

Concept used:

Write the expression for economical annual cost.

EAC=P[i(1+i)n(1+i)n1]S[i(1+i)n1]+R×D ...... (I)

Here, the initial cost is P, the resale value is S, the operation cost per kilometer is R, the distance travelled by car is D, the interest rate is i and time period is n.

Calculations:

Calculate the economical annual cost for alternative A.

Substitute $8900 for P, $1700 for S, 0.09 for R, 12000 for D, 8% for i and 3 for n in Equation (I).

EACA=$8900[0.08(1+0.08)3(1+0.08)31]$1700[0.08(1+0.08)31]+($0.09×12000)=$8900(0.388)$1700(0.3080)+$1080=$3453.5$523.6+$1080=$4010

Calculate the economical annual cost for alternative B.

Substitute $8000 for P, $0.075 for R, 12000 for D, 8% for i and 3 for n in Equation (I).

EACB=$8000[0.08(1+0.08)3(1+0.08)31]S[0.08(1+0.08)31]+($0.075×12000)=$8000(0.388)S(0.3080)+$900=$31040.3080S+$900=$40040.3080S

Equate the economical annual cost for alternative A with the economical annual cost for alternative B.

EACA=EACB$4010=$40040.3080S$6=0.3080SS=$19.48.

Conclusion:

Thus, the resale value of alternative B is $19.48 to provide equal economical transportation.

To determine

(b)

The resale value of alternative B to provide equal economical transportation.

Expert Solution
Check Mark

Answer to Problem 75P

The resale value of alternative B is $272.72 to provide equal economical transportation.

Explanation of Solution

Given:

For alternative A:

The initial cost is $8900.

The resale value is $1700.

The operation cost per kilometer is $0.09.

For alternative B:

The initial cost is $8900.

The operation cost per kilometer is $0.08.

The distance travelled by car is 9000km.

The interest rate is 8%.

The time period is 3years.

Calculations:

Calculate the economical annual cost for alternative A.

Substitute $8900 for P, $1700 for S, $0.09 for R, 9000 for D, 8% for i and 3 for n in Equation (I).

EACA=$8900[0.08(1+0.08)3(1+0.08)31]$1700[0.08(1+0.08)31]+($0.09×9000)=$8900(0.388)$1700(0.3080)+$810=$3453.5$523.6+$810=$3740

Calculate the economical annual cost for alternative B.

Substitute $8000 for P, $0.08 for R, 9000 for D, 8% for i and 3 for n in Equation (I).

EACB=$8000[0.08(1+0.08)3(1+0.08)31]S[0.08(1+0.08)31]+($0.08×9000)=$8000(0.388)S(0.3080)+$720=$31040.3080S+$720=$38240.3080S

Equate the economical annual cost for alternative A with the economical annual cost for alternative B.

EACA=EACB$3740=$38240.3080S$84=0.3080SS=$272.72.

Conclusion:

Thus, the resale value of alternative B is $272.72 to provide equal economical transportation.

To determine

(c)

The resale value of alternative B to provide equal economical transportation.

Expert Solution
Check Mark

Answer to Problem 75P

The resale value of alternative B is $251.2 to provide equal economical transportation.

Explanation of Solution

Given:

For alternative A:

The initial cost is $8900.

The resale value is $1700.

The operation cost per kilometer is $0.09.

For alternative B:

The initial cost is $8900.

The operation cost per kilometer is $0.08.

The distance travelled by car is 12000km.

The interest rate is 6%.

The time period is 3years.

Calculations:

Calculate the economical annual cost for alternative A.

Substitute $8900 for P, $1700 for S, $0.09 for R, 12000 for D, 6% for i and 3 for n in Equation (I).

EACA=$8900[0.06(1+0.06)3(1+0.06)31]$1700[0.06(1+0.06)31]+($0.09×12000)=$8900(0.374)$1700(0.3141)+$1080=$3328.6$533.97+$1080=$3874.63

Calculate the economical annual cost for alternative B.

Substitute $8000 for P, $0.08 for R, 12000 for D, 6% for i and 3 for n in Equation (I).

EACB=$8000[0.06(1+0.06)3(1+0.06)31]S[0.06(1+0.06)31]+$0.08×12000=$8000(0.374)S(0.3141)+$960=$29920.3141S+$960=$39520.3141S

Equate the economical annual cost for alternative A with the economical annual cost for alternative B.

EACA=EACB$3874.63=$39520.3141S$77.37=0.3080SS=$251.2.

Conclusion:

Thus, the resale value of alternative B is $251.2 to provide equal economical transportation.

To determine

(d)

The resale value of alternative B to provide equal economical transportation.

Expert Solution
Check Mark

Answer to Problem 75P

The resale value of alternative B is $202.5 to provide equal economical transportation.

Explanation of Solution

Given:

For alternative A:

The initial cost is $8900.

The resale value is $1700.

The operation cost per kilometer is $0.09.

For alternative B:

The initial cost is $8900.

The operation cost per kilometer is $0.075.

The distance travelled by car is 9000km.

The interest rate is 6%.

The time period is 3years.

Calculations:

Calculate the economical annual cost for alternative A.

Substitute $8900 for P, $1700 for S, $0.09 for R, 9000 for D, 6% for i and 3 for n in Equation (I).

EACA=$8900[0.06(1+0.06)3(1+0.06)31]$1700[0.06(1+0.06)31]+($0.09×9000)=$8900(0.374)$1700(0.3141)+$810=$3328.6$533.97+$810=$3604.63

Calculate the economical annual cost for alternative B.

Substitute $8000 for P, 0.075 for R, 9000 for D, 6% for i and 3 for n in Equation (I).

EACB=$8000[0.06(1+0.06)3(1+0.06)31]S[0.06(1+0.06)31]+($0.075×9000)=$8000(0.374)S(0.3141)+$675=$29920.3141S+$675=$36670.3141S

Equate the economical annual cost for alternative A with the economical annual cost for alternative B.

EACA=EACB$3604.63=$36670.3141S$62.37=0.3080SS=$202.5.

Conclusion:

Thus, the resale value of alternative B is $202.5 to provide equal economical transportation.

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ENGINEERING ECO ANALYSIS W/STUDY GUIDE

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