A large city in the mid-West needs to acquire a street-cleaning machine to keep its roads looking nice year-round. A used cleaning vehicle will cost $85,000 and have a $20,000 market (salvage) value at the end of its five-year life. A new system with advanced features will cost $150,000 and have a $40,000 market value at the end of its five-year life. The new system is expected to reduce labor hours compared with the used system. Current streetcleaning activity requires the used system to operate 8 hours per day for 20 days per month. Labor costs $50 per hour (including fringe benefits), and MARR is 12% per year. Find the breakeven percent reduction in labor hours for the new system.

A large city in the mid-West needs to acquire a street-cleaning machine to keep its roads looking nice year-round. A used cleaning vehicle will cost $85,000 and have a $20,000 market (salvage) value at the end of its five-year life. A new system with advanced features will cost $150,000 and have a $40,000 market value at the end of its five-year life. The new system is expected to reduce labor hours compared with the used system. Current streetcleaning activity requires the used system to operate 8 hours per day for 20 days per month. Labor costs $50 per hour (including fringe benefits), and MARR is 12% per year. Find the breakeven percent reduction in labor hours for the new system.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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