Example 6 Use the incremental analysis procedure to select the best alternative. DN is not an option. Design 1 Design 2 Design 3 Design 4 Investment $100,000 40,600 148,200 122,000 Annual Expenses $29,000 6,900 14,800 22,100 Useful Life 5 5 5 5 SV $10.000 14.000 25.600 14.000

An in place machine has an equivalent annual worth of $-100000 for each year of its maximum remaining useful life of two years. A suitable replacement is determined to have equivalent annual worth values of $-175000, $-125000, and $-150000 per year if kept for 1,2, or 3 years, respectively. When should the company replace the machine, if it uses a fixed 3-year planning horizon? Use an interest rate of 17.255609824% per year compounded semiannualy.

Company X is considering the purchase of a helicopter for connecting services between their base airport and the new inter-county airport being built about 30 miles away. It is believed that the chopper will be needed only for 6 years until the Rapid Transit Connection is phased in. The estimates on two types of helicopters under consideration, The Whirl 2 B and The ROT 8, are given below: The Whirl 2 B First Cost Annual Maintenance Salvage Value Useful life in years $95,000 $3,000 $12,000 The ROT 8 $120,000 $9,000 $25,000 6 3 Assuming that the Whirl 2B will be available in the future with identical costs, what is the annual cost advantage of selecting The Whirl 2B ? (Use an interest rate of 10 %) A. cost more than $4,000 C. cost between $4,000 and $3,000 B. save between $3,000 and $2000 D. save more than $4,000

Answer part A Answer part B

• Smalltown, PA currently has a $38,000/year contract with a private company to transport students to their school and back. Smalltown can buy a bus for $40,000 that will be adequate for the next 5 years. Operating and maintenance costs are estimated to be $25,000 per year. At the end of 5 years, the bus will have an estimated salvage value of $5,000. Their MARR is 10%/year. а. What is the Excel or closed form equation (along with the value of relevant parameters) to determine this investment's internal rate of return?

A $45,000 investment in a new conveyor system is projected to improve throughput and increasing revenue by $14,000 per year for five years The conveyor will have an estimated market value of $4,000 at the end of five years. Using an MARR = 12% per year, what is the FW? $-19,329.40 $13,635.70 $16,998.90 none of the above K ?

A project has an initial cost of $150,000. The annual operating cost is $8000 for the first 10 years and $5000 thereafter. There is a recurring $15000 maintenance cost each 15 years. The equation that represents the capitalized cost of this project at i=10% is: CW(10%) =150,000+8,000(P/A, 10 %, 10)+(5000/0.1) (P/F, 10%, 11 ) + (15000 (A/F, 10%, 15))/0.1 CW(10%) - 150,000+8,000(P/A, 10 %, 10) +(5000/0.1) (P/F, 10%, 10 ) + ( 15000(A/F, 10%, 15))/0.1 O CW(10%) =150,000+8,000(P/A, 10 %, 10) + (5000 / 0.1) ( P/F, 10%, 11) +15000(A/F, 10%, 15) O CW(10%) =150,000+8,000(P/A, 10 %, 10) +(5000/0.1) (P/F, 10% , 9) +(15000(A/F, 10%, 15))/0.1