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 6, Problem 15P
To determine
Calculate the incremental
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Students have asked these similar questions
Alternative A and B are two mutually exclusive cost alternatives, and one of them must be
selected. Using Incremental Analysis, which of the alternatives should be recommended based on
ERR (the External Rate of Return)? ·
MARR (Minimum acceptable rate of return) is 12% per year while the re-investment rate is
10% per year.
The study period is 20 years. Assume repeatability is appropriate for this comparison.
Alternative
A
B
$ (101,000)
$ (6,000)
20 years
$ (6,000)
$ (18,500 )
10 years
Initial capital investment
Annual operating expenses
Useful life
Salvage value
None
None
Advanced Modular Technology (AMT) makes energy cleaner, safer, more secure and more
efficient. It typically exhibits net annual revenues that increase over a fairly long period. In
the long run, an AMT project may be profitable as measured by IRR, but its simple payback
period may be unacceptable. Evaluate this AMT project using the IRR method when the
company MARR is 13% per year and its maximum allowable payback period is two years.
What is your recommendation?
$98,000
$2,000 +
Capital investment at time 0
Net revenues in year k
$10,000 • (k- 1)
$9,000
Market (salvage) value
Life
4 years
An aerodynamic three-wheeled automobile (the Dart) runs on
compressed natural gas stored in two cylinders in the rear of the
vehicle. The $13,000 Dart can cruise at speeds up to 85 miles per
hour, and it can travel 90 miles per gallon of fuel. Another
two-seater automobile costs $12,000 and averages 50 miles per
gallon of compressed natural gas. If fuel costs $8.00 per gallon
and MARR is 10% per year, over what range of annual miles
driven is the Dart more economical? Assume a useful life of six
years for both cars.
Click the icon to view the interest and annuity table for
discrete compounding when the MARR is 10% per year.
...
Dart is more economical if you are planning on driving
more per year. (Round to the nearest whole number.)
miles or
Chapter 6 Solutions
Engineering Economy (17th Edition)
Ch. 6 - An oil refinery finds that it is necessary to...Ch. 6 - The Consolidated Oil Company must install...Ch. 6 - One of the mutually exclusive alternatives below...Ch. 6 - Three mutually exclusive design alternatives are...Ch. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Fiesta Foundry is considering a new furnace that...Ch. 6 - Prob. 8PCh. 6 - DuPont claims that its synthetic composites will...Ch. 6 - Prob. 10P
Ch. 6 - Which alternative in the table below should be...Ch. 6 - Prob. 12PCh. 6 - The alternatives for an engineering project to...Ch. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Refer to the situation in Problem 6-16. Most...Ch. 6 - An old, heavily used warehouse currently has an...Ch. 6 - Prob. 19PCh. 6 - Two electric motors (A and B) are being considered...Ch. 6 - Two mutually exclusive design alternatives are...Ch. 6 - Pamela recently moved to Celebration, Florida, an...Ch. 6 - Environmentally conscious companies are looking...Ch. 6 - Prob. 24PCh. 6 - Two 100 horsepower motors are being considered for...Ch. 6 - In the Rawhide Company (a leather products...Ch. 6 - Refer to Problem 6-2. Solve this problem using the...Ch. 6 - Prob. 28PCh. 6 - Prob. 29PCh. 6 - Two electric motors are being considered to drive...Ch. 6 - Prob. 31PCh. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Potable water is in short supply in many...Ch. 6 - Three mutually exclusive investment alternatives...Ch. 6 - Prob. 36PCh. 6 - A companys MARR is 10% per year. Two mutually...Ch. 6 - Prob. 38PCh. 6 - a. Compare the probable part cost from Machine A...Ch. 6 - A one-mile section of a roadway in Florida has...Ch. 6 - Two mutually exclusive alternatives are being...Ch. 6 - Prob. 42PCh. 6 - IBM is considering an environmentally conscious...Ch. 6 - Three mutually exclusive earth-moving pieces of...Ch. 6 - A piece of production equipment is to be replaced...Ch. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 51PCh. 6 - Prob. 52PCh. 6 - Prob. 53PCh. 6 - Use the imputed market value technique to...Ch. 6 - Prob. 55PCh. 6 - Prob. 56PCh. 6 - Prob. 57PCh. 6 - Prob. 58PCh. 6 - Prob. 59PCh. 6 - Prob. 60PCh. 6 - Prob. 61PCh. 6 - Prob. 62PCh. 6 - Prob. 63PCh. 6 - Prob. 64PCh. 6 - Prob. 65PCh. 6 - Prob. 66PCh. 6 - Three models of baseball bats will be manufactured...Ch. 6 - Refer to Example 6-3. Re-evaluate the recommended...Ch. 6 - Prob. 69SECh. 6 - Prob. 70SECh. 6 - Prob. 71SECh. 6 - Prob. 72CSCh. 6 - Prob. 73CSCh. 6 - Prob. 74CSCh. 6 - Prob. 75FECh. 6 - Prob. 76FECh. 6 - Prob. 77FECh. 6 - Complete the following analysis of cost...Ch. 6 - Prob. 79FECh. 6 - For the following table, assume a MARR of 10% per...Ch. 6 - Prob. 81FECh. 6 - Problems 6-82 through 6-85. (6.4) Table P6-82 Data...Ch. 6 - Prob. 83FECh. 6 - Problems 6-82 through 6-85. (6.4) Table P6-82 Data...Ch. 6 - Problems 6-82 through 6-85. (6.4) Table P6-82 Data...Ch. 6 - Consider the mutually exclusive alternatives given...Ch. 6 - Prob. 87FE
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Similar questions
- An aerodynamic three-wheeled automobile (the Dart) runs on compressed natural gas stored in two cylinders in the rear of the vehicle. The $12,000 Dart can cruise speeds up to 80 miles per hour, and it can travel 105 miles per gallon of fuel. Another two-seater automobile costs $8,000 and averages 50 miles per gallon of compressed natural useful life of seven years for both cars. If fuel costs $8.75 per gallon and MARR is 8% per year, over what range of annual miles driven is the Dart more economical? Assume a gas.arrow_forwardTwo electric motors (A and B) are being considered to drive a centrifugal pump. Each motor is capable of delivering 40 horsepower (output) to the pumping operation. It is expected that the motors will be in use 800 hours per year. If electricity costs $0.08 per kilowatt-hour and 1 hp = 0.746 kW, which motor should be selected if MARR = 6% per year? Refer to the data below. The AW for Motor A is $ Initial Cost Electrical Efficiency Annual Maintenance 5 years Click the icon to view the interest and annuity table for discrete compounding when the MARR is 6% per year. (Round to the nearest dollar.) Motor A $1,700 0.75 $50 Life Motor B $900 0.55 $80 5 yearsarrow_forwardIf the IRR of Alternative A is 10%, the IRR of Alternative B is 8% and the MARR is 6%, which of the following is true? OAlternative B is preferred over Alternative A Alternative A is preferred over Alternative B Both alternatives are preferred over the do nothing alternative Both b and c are truearrow_forward
- Capital Investment Annual Revenues Annual Expenses MV at end of useful life Useful Life IRR Alternative 1 $16,000 $7,000 $2,400 $1,600 4 years 9.1% Alternative 2 $23,000 $13,000 $5,000 $600 12 years 33.7% □arrow_forwardTwo electric motors (A and B) are being considered to drive a centrifugal pump. Each motor is capable of delivering 60 horsepower (output) to the pumping operation. It is expected that the motors will be in use 1,200 hours per year. If electricity costs $0.09 per kilowatt-hour and 1 hp = 0.746 kW, which motor should be selected if MARR = 7% per year? Refer to the data below.arrow_forwardA deep water port for imported liquefied natural gas (LNG) is needed for three years. At the end of the third year, it will cost more to dismantle the LNG facility than it produces in revenues. The cash flows are estimated as follows: The IRR for this LNG facility is closest to which choice below? Choose the closest answer below. A. The IRR for the LNG facility is 9.5% per year. B. The IRR for the LNG facility is 4.7% per year. C. The IRR for the LNG facility is 12.2% per year. D. The IRR for the LNG facility is 14.6% per year. EOY 0 1 2 3 Net Cash Flow - $54 million 44 million 40 million - 24 millionarrow_forward
- Upload the picture of your complete solutions including the correct cash flow diagram (for plus points) and your conclusion. You are faced with a decision on an investment proposal. Specifically, the estimated additional income from the investment is $125,000 per year; the investment cost is $400,000; and the first year estimated expense of $20,000 and will increase a rate of 5% per year. Assume an 8-year analysis period, no salvage value, and MARR = 15% per year. a. Calculate the PW and FW of this proposal? b. What is the ERR ( Ԑ=MARR) of this proposal? c. What is the Simple and Discounted payback?arrow_forwardVidhi is investing in some rental property in Collegeville and is investigating her income from the investment. She knows the rental revenue will increase each year, but so will the maintenance expenses. She has been able to generate the data that follows regarding this investment opportunity. Assume that all cash flows occur at the end of each year and that the purchase and sale of this property are not relevant to the study. • If Vidhi's MARR = 6% per year, is this investment a profitable undertaking? Use Future Worth method! Year Revenue Year Expenses 1 $6,000 1 $3,100 2 6,200 2 3,300 6,300 3 3,500 6,400 4 3,700 6,500 5 3,900 6,600 6 6,100 6,700 7 4,300 6,800 8 4,500 6,900 4,700 7,000 4,900 3 4 5 6 7 8 9 10 9 10arrow_forwardFiesta Foundry is considering a new furnace that will allow them to be more productive. Three alternative furnaces are under consideration. Perform an incremental analysis of these alternatives using the IRR method for each increment of cash flows. The MARR is 14% per year.arrow_forward
- Nadine Chelesvig has patented her invention. She is offering a potential manufacturer two contracts for the exclusive right to manufacture and market her product. Plan A calls for an immediate single lump sum payment to her of $200,000. Plan B calls for an annual payment of $16,000 plus a royalty of $0.60 per unit sold. The remaining life of the patent is 10 years. Nadine uses a MARR of 10%/year. What must be the uniform annual sales volume of the product for Nadine to be indifferent between the contracts, based on an annual worth analysis? unitsarrow_forwardThe PW-based relation for the incremental cash flow series to find A/* between the lower first-cost alternative X and alternative Y has been developed. 0=-38,000+9000(P/A‚¡ *,10) + (-2000(P/F,Ai*,10)) Determine the highest MARR value for which Y is preferred over X. Any MARR value less than % favors Y.arrow_forwardNadine Chelesvig has patented her invention. She is offering a potential manufacturer two contracts for the exclusive right to manufacture and market her product. Plan A calls for an immediate single lump sum payment to her of $30,000. Plan B calls for an annual payment of $1,000 plus a royalty of $0.50 per unit sold. The remaining life of the patent is10 years. Nadine uses a MARR of 10%/year. Solve, a. What must be the uniform annual sales volume of the product for Nadine to be indifferent between the contracts, based on a present worth analysis? b. If the sales volume is below the volume determined in (a), which contract would the manufacturer prefer?arrow_forward
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