Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 12P
To determine
Calculate the maximum
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A California utility firm is considering building a 50-megawatt geothermalplant that generates electricity from naturally occurring underground heal. The binary geothermal system will cost $85 million to build and $6 million (including any income-tax effect) to operate per year. (Unlike a conventional fossilfuel plant, this system will require virtually no fuel costs.) The geothermal plant is to last 25 years. At the end of that time, the expected salvage value will be about the same as the cost to remove the plant. The plant will be in operation for 70% (the plant-utilization factor) of the year (or 70% of 8,760 hours per year). If the firm's MARR is 14% per year, determine the cost of generating electricity per kilowatt-hour.
You invest in a piece of equipment costing $30,000. The equipment will be used for two years, at the end of which time the salvage value of the machine is expected to be $10,000. The machine will be used for 5,000 hours during the first year and 8,000 hours during the second year. The expected annual net savings in operating costs will be $25,000 during the first year and $40,000 during the second year. If your interest rate is 10%, what would be the equivalent net savings per machine-hour?
Solved in Excel is perfered!
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.)
Chapter 5 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - If a project costs 100,000 and is expected to...Ch. 5 - Refer to Problem 5.2, and answer the following...Ch. 5 - Prob. 5PCh. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Consider the cash flows from an investment...Ch. 5 - Prob. 10P
Ch. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Consider the project balances in Table P5.19 for a...Ch. 5 - Your RD group has developed and tested a computer...Ch. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Geo-Star Manufacturing Company is considering a...Ch. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - Prob. 40PCh. 5 - Prob. 41PCh. 5 - Prob. 42PCh. 5 - Two methods of carrying away surface runoff water...Ch. 5 - Prob. 44PCh. 5 - Prob. 45PCh. 5 - Prob. 46PCh. 5 - Prob. 47PCh. 5 - Prob. 48PCh. 5 - Prob. 49PCh. 5 - Prob. 50PCh. 5 - Prob. 51PCh. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - Prob. 56PCh. 5 - Prob. 57PCh. 5 - Prob. 58PCh. 5 - Prob. 59PCh. 5 - Prob. 1STCh. 5 - Prob. 2ST
Knowledge Booster
Similar questions
- To decrease the costs of operating a lock in a large river, a new system of operation is proposed. The system will cost $830,000 to design and build. It is estimated that it will have to be reworked every 10 years at a cost of $120,000. In addition, an expenditure of $80,000 will have to be made at the end of the fifth year for a new type of gear that will not be available until then. Annual operating costs are expected to be $70,000 for the first 15 years and $100,000 a year thereafter. Compute the capitalized cost of perpetual service at i= 7%. Click the icon to view the interest factors for discrete compounding when i=7% per year. - X More Info The capitalized cost of perpetual service is $ million. (Round to three decimal places.) Single Payment Compound Amount Factor (F/P, i, N) 1.0700 Present Worth Factor Compound Amount Factor (F/A, i, N) Equal Payment Series Sinking Present Fund Worth Factor Factor (A/F, i, N) 1.0000 0.4831 N (P/F, i, N) (P/A, i, N) 0.9346 1 0.9346 1.0000 2…arrow_forwardYour engineering firm needs a rapid prototyping machine. The company gives you two options. In Option 1 you purchase the machine outright for $50,000, pay a maintenance contract of $1,000 per year (paid in advance at the beginning of each year), and expect to be able to resell the machine after 10 years at a salvage value of $10,000. In Option 2, you lease the machine at $7,000 per year (paid in advance at the beginning of each year) and pay no maintenance, but receive no salvage. Assume that you will be able to take in $8,000 per year in income from this machine. Also assume that an additional option is not to buy the machine at all, but to put the money in the bank at 5% nominal interest rate, compounded annually. Which option will be best for the firm?arrow_forwardA piece of equipment has an initial cost of $150,000. The market value at the end of each of the next five years is expected to be $65,000, $45,000, $25,000, $5,000 and $0 respectively. The operating and maintenance costs in year 1 are expected to be $10,000 and to increase by $4,000 per year starting in year 2. What is the minimum cost life for this equipment? Assume MARR = 10 %.arrow_forward
- Capital recovery (CR) is the equivalent annual amount that an asset, process, or system must earn each year to just recover the first cost and a stated rate of return over its expected life. Salvage value is considered when calculating CR. True Falsearrow_forwardYour company is considering purchasing a new CNC machining center. The net benefits in the first year will be $50,000, increasing at a rate of $4,000 per year for the subsequent nine years (so the benefits are $50,000, $54,000, $58,000, etc.). You think the company can get a salvage value of $18,000 at the end of its 10-year useful life. If the MARR is 8%, how much can the company justify spending on the CNC machining center? Solve by present worth analysis.arrow_forwardCovington Corporation purchased a vibratory finishing machine for $20,000 in year 0. The useful life of the machine is 10 years, at the end of which the machine is estimated to have a salvage value of zero. The machine generates net annual revenues of $6,000. The annual operating and maintenance expenses are estimated to be $800. If Covington's MARR is 16%, how many years will it take before this machine becomes profitable? Assume that the cash flows occur continuously throughout the year. It will take years before this machine becomes profitable. (Round to one decimal place.)arrow_forward
- A company is considering constructing a plant to manufacture a proposed new product. The land costs $250,000, the building costs $650,000, the equipment costs $300,000, and $80,000 additional working capital is required. It is expected that the product will result in sales of $700,000 per year for 11 years, at which time the land can be sold for $350,000, the building for $400,000, and the equipment for $50,000. All of the working capital would-be recovered at the EOY 11. The annual expenses for labor, materials, and all other items are estimated to total $500,000. If the company requires a MARR of 14% per year on projects of comparable risk, determine if it should invest in the new product line. Use the AW method. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 14% per year.arrow_forwardAn expenditure of $20,000 is made to modify a material-handling system in a small job shop. This modification will result in first-year savings of $2,000, a second-year savings of $4,000, and a savings of $5,000 per year thereafter. How many years must the system last if an 18% return on investment is required? The system is tailor made for this job shop and has no market (salvage) value at any time.arrow_forwardThe Titanic Shipbuilding Company has a noncancelable contract to build a small cargo vessel. Construction involves a cash outlay of $265,000 at the end of each of the next two years. At the end of the third year, the company will receive payment of $625,000. The company can speed up construction by working an extra shift. In this case, there will be a cash outlay of $575,000 at the end of the first year followed by a cash payment of $625,000 at the end of the second year. Use the IRR rule to show the (approximate) range of opportunity costs of capital at which the company should work the extra shift Please answer fast I give you upvotearrow_forward
- FootballComm LLC is a manufacturer of devices for football coaches and their coaching staffs that enables them to quickly and effectively communicate with one another during a game through a wireless sideline headset system. Currently, the company purchases all of the headsets included in their systems from a China-based supplier, but they have experienced a significant decrease in overall headset quality. To correct the problem, the company is considering producing their own headsets in-house. The company estimates that the transition will take place over 12 months. The system is expected to have an eight-year service life and produce savings and expenditures given in the table below. If the firm's MARR is 15%, use the NPW method to calculate the economic worth of producing the headsets in house. Click the icon to view the table for the savings and expenditures of the system. Click the icon to view the interest factors for discrete compounding when MARR = 15% per year. The economic…arrow_forwardLockheed Martin is considering purchasing a new fine pitch machine to speed up the process in manufacturing Power Control Boards (PCBs). The initial cost of the machine is $125,000 and has a useful life of 15 years. There is no salvage value for the fine pitching machine. Since manufacturing would speed up so would the manual inspection step of the process and therefore labor costs are expected to be $4,000 per year. However, adding the new machine is expected to reduce rework costs of $15,000 per year. The MARR of the company is 3%. a. Calculate the IRR (internal rate of return) of purchasing the new fine pitch machine using interpolation. You must show your work. Hint: Use the MARR as a starting point. b. Calculate the IRR using an excel function. You must turn in an excel file. You can do this in google sheets as well. Hint: Use RATE or IRR. (5 points)c. Based on your calculations in (a) and (b) and the MARR stated in the problem is this a good investment?arrow_forwardFootballComm LLC is a manufacturer of devices for football coaches and their coaching staffs that enables them to quickly and effectively communicate with one another during a game through a wireless sideline headset system. Currently, the company purchases all of the headsets included in their systems from a China-based supplier, but they have experienced a significant decrease in overall headset quality. To correct the problem, the company is considering producing their own headsets in-house. The company estimates that the transition will take place over 12 months. The system is expected to have an eight-year service life and produce savings and expenditures given in the table below. If the firm's MARR is 15%, use the NPW method to calculate the economic worth of producing the headsets in house. E Click the icon to view the table for the savings and expenditures of the system. E Click the icon to view the interest factors for discrete compounding when MARR = 15% per year. The…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education