Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Question
Chapter 13, Problem 12P
To determine
Formulation of capital allocation problem as a linear integer programming model.
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Students have asked these similar questions
Eaton Medical Services is evaluating 10 independent indivisible projects, all with positive NPV. The company's capital budgeting for the year is limited to a maximum of $5,000,000.
(A) Use solver to find the optimum combination of projects the company should accept, under the assumption that A and B are mutually exclusive and one of them has to be selected.
(B) Ignore the constraint from previous part, assume that project “I” has to be accepted. Use solver to find optimum combination of projects the company should accept now.
Please show all steps to compute in excel using solver to get to the right answers. Thank you in advance, will upvote!
Project
Cost
NPV
A
1,061,191
122,737
B
561,758
58,102
C
1,647,849
280,660
D
1,026,020
89,365
E
191,870
17,568
F
1,333,625
76,960
G
3,102,642
123,240
H
275,568
79,367
I
2,044,070
60,506
J
1,017,567
56,690
LEARNING EXERCISE 2
1. Two alternative designs are under consideration for a tapered fastening pin. The fastening pins are
sold for $0.70 each. Either design will serve equally well and will involve the same material and
manufacturing cost except for the lathe and drill operations. Design A will require 12 hours of lathe time
and 5 hours of drill time per 1,000 units. Design B will require 7 hours of lathe time and 8 hours of drill
time per 1,000 units. The variable operating cost of the lathe, including labor, is $18.60 per hour. The
variable operating cost of the drill, including labor, is $16.90 per hour. Finally, there is a sunk cost of
$5,000 for Design A and $9,000 for Design B due to obsolete tooling.
a. Which design should be adopted if 125,000 units are sold each year?2w gawen ni yilaunsm
b. What is the annual saving over the other design? dipet jeen
e1s enoiluloe uoy eue elsM
evip elshetem pnimsel ertt of 1ele vem uoY ugjuo ioubivibni ns al airlT
Kipling Equipment Inc. must decide to produce either a face mask or a face shield to
X alleviate the spread of a quickly evolving coronavirus. The face mask is disposable and
developing it could potentially lead to a profit of $300,000 if competition is high or a
profit of $470,000 if competition is low. The face shield, on the other hand, is reusable
and has the potential of generating a fixed profit of $430,000 irrespective of high or
low competition. The probability of high competition is 52% while that of low
competition is 48%.
Co
Part A
Construct a decision tree or a payoff table for the decision problem and use it to
answer the following questions.
a) What is the expected monetary value of the optimal decision?
$
b) Based on expected monetary value, what should the Kipling do?
$ Produce face shield
c) What is the upper bound on the amount Kipling should pay for additional
information?
$
Part B
Chapter 13 Solutions
Engineering Economy (17th Edition)
Knowledge Booster
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- Engineering Economics Bawal gumamit ng excel( Don't use Excel) A firm is considering the development of several new products. The products under consideration are listed here; the products in each project group are mutually exclusive. (Insert Table) At most one product from each group will be selected. The firm has MARR of 10% per year and a capital investment budget limitation on development costs of P2,100,000. the life of all products is assumed to be ten (10) years. Assume no market values at the end of 10 years.arrow_forwardA company is analyzing a make-versus-purchase situation for a component used in several products, and the engineering department has developed these data: Option A: Option B: Purchase 10,000 items per year at a fixed price of $8.88 per item. The cost of placing the order is negligible according to the present cost accounting procedure. Manufacture 10,000 items per year, using available capacity in the factory. Cost estimates are direct materials = $4.96 per item and direct labor = $1.31 per item. Manufacturing overhead is allocated at 200% of direct labor (= $2.62 per item). Based on these data, should the item be purchased or manufactured? The total cost of Option A is $ (Round to the nearest dollar.) The total cost of Option B is $ . (Round to the nearest dollar.) Should the item be purchased or manufactured? Choose the correct answer below. O The item should be manufactured. O The item should be purchased.arrow_forwardA state is planning to construct a stretch of highway extending to 60 Kilometer. The state signed a contract based on the BOT option (Build, Operate, and Transfer) with a construction company. The construction company will finish the project in two years (30 kilometers per year), after which it will operate the highway for 25 years. The company generates revenues by collecting a flat fees from the cars using the highway. The following information is available: Cost/Kilometer: 1,000,000 S Number of cars using the highway: 500,000 car for the first year of usage, then increase by 5% a year. - Annual operation cost: 100,000 $ for the first year of usage, then increase by 10,000 $ every year. The company's MARR is 8% per year. Calculate the value of the fee charged/car so that the Net Present worth of the project is 25,000,000 S.arrow_forward
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