ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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There are three alternatives X,Y,Z. With 10% MARR, which alternative should be chosen based on following conditions and why?
For X, initial cost is $10k, yearly revenue is $6K, Salvage is $1k and useful life is calculated as 2yrs.
For Y, initial cost is $15k, yearly revenue is $10K, Salvage is -$2k and useful life is calculated as 3yrs.
For Z, initial cost is $12k, yearly revenue is $5K, Salvage is $3k and useful life is calculated as 4yrs.
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- A new highway is to be constructed. Design A calls for a concrete pavement costing $80 per foot with a 20-year life; four paved ditches costing $3 per foot each; and four box culverts every mile, each costing $10,000 and having a 20-year life. Annual maintenance will cost $1,600 per mile; the culverts must be cleaned every five years at a cost of $400 each per mile. Design B calls for a bituminous pavement costing $55 per foot with a 10-year life; four sodded ditches costing $1.40 per foot each; and four pipe culverts every mile, each costing $2,100 and having a 10-year life. The replacement culverts will cost $2,450 each. Annual maintenance will cost $2,600 per mile; the culverts must be cleaned yearly at a cost of $225 each per mile; and the annual ditch maintenance will cost $1.55 per foot per ditch. Compare the two designs on the basis of equivalent worth per mile for a 20-year period. Find the most economical design on the basis of AW and PW if the MARR is 12% per year. Click the…arrow_forwardNote:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardFor Annual Worth analysis, when you have variable costs and benefits, the proper analysis approach would be to: Group of answer choices None of the above Maximize EUAB Maximize NPW Maximize (EUAB - EUAC) Maximize PW of Benefitsarrow_forward
- There are two alternatives P,M. With 15% MARR under 20 years study period, which alternative should be chosen based on the following conditions and why ? For P, initial cost is $14k, yearly cost is $14k, Salvage is $8k and useful life is calculated as 5 years. For M, initial cost is $65k, yearly revenue is $9k, Salvage is $13k and useful life is calculated as 20 years.arrow_forwardThe 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 12,450arrow_forwardCan you compute the PW of alternative A, the AW of alternative B, the FW of Alternative C, and the PW of alternative D? Also for a MARR of 12%, rank the MEAs from most profitable to least profitable. HINT: You will need to perform additional calculations before answering this question.arrow_forward
- You have decided to open a microbrewery selling university-themed beers as one of your product lines. You need to conduct a breakeven analysis of sales and price. You know your fixed costs but based on your marketing plan you are not sure of pricing and sales. Your company MARR is 5%, and fixed costs include an initial capital investment of $250,000 with fixed annual expenses of $100,000. Use a 5-year planning horizon and assume that these expenses will not grow with inflation. a. Draw the cash flow diagram. b. Populate the following table and plot the NPW results in a meaningful plot. (Make sure you label your axis, and your plot should contain three curves.) c. Make a pricing recommendation as a function of sales. You would like to make a minimum of $100,000 for your work on this project.arrow_forwardThe MARR is 15%. Three alternatives are available and the associated cash flow is as follow: Year First Cost A B C $1,700 $2,100 $3,750 Annual Benefit Useful Life 2 $1,000 $1,000 $1,000 3 6 Answer the following in this format: 1.23 1. The payback period for Alternative A is 2. The payback period for Alternative B is 3. The payback period for Alternative C is Based on Payback period analysis, Alternative should be selected. (Enter only the letter)arrow_forwardWhich of the following interpretations would be best for the scenario analysis results shown below? Worst- case PW (18%) -$650,000 IRR 2.10% Most- likely case Best-case $58,000 $2,660,000 33% 14.60% a. Since the most-likely case has a PW <0, the project should be abandoned immediately b. Since the worst-case has a negative present worth, this project must be rejected. c. Since the average of the three cases is a positive present worth, the project is acceptable. d. Because only one of the scenarios shows the project as profitable, the project should be considered very risky, and, if accepted, should be subject to greater scrutiny in its planning and forecasting.arrow_forward
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