Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 6, Problem 41P
Two mutually exclusive alternatives are being considered for the environmental protection equipment at a petroleum refinery. One of these alternatives must be selected. The estimated cash flows for each alternative are as follows: (6.5)
- a. Which environmental protection equipment alternative should be selected? The firm’s MARR is 20% per year. Assume the equipment will be needed indefinitely.
- b. Assume the study period is shortened to five years. The market value of Alternative B after five years is estimated to be $15,000. Which alternative would you recommend?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Vidhi 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
10
Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a
first cost of $100,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Labor costs would
increase $2,000 per year using the gang punch, but raw material costs would decrease $12,000 per year. MARR is 5 %/year.
Part a
Your answer is incorrect.
What is the discounted payback period for this investment?
7893
years
Carry all interim calculations to 5 decimal places and then round your final answer to the nearest year. The tolerance is ±1.
It is estimated that an investment alternative with an
initial investment cost of 150000 TL will generate
annual revenues of 85000 TL and annual expenses of
20000 TL. It is expected to have a scrap value of 95000
TL at the end of its 5-year life. Find out how sensitive
the investment decision of this investment alternative
is to its revenues. (MARR: %10)
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- An industrial coal-fired boiler for process steam is equipped with a 10-year-old electrostatic precipitator (ESP). Changes in coal quality have caused stack emissions to be in noncompliance with federal standards for particulates. Two mutually exclusive alternatives have been proposed to rectify this problem (doing nothing is not an option). The MARR is 9% per year. Make a recommendation regarding which alternative to select. 3. An industrial coal-fired boiler for process steam is equipped with a 10-year-old electrostatic precipitator (ESP). Changes in coal quality have caused stack emissions to be in noncompliance with federal standards for particulates. Two mutually exclusive alternatives have been proposed to rectify this problem (doing nothing is not an option). Capital investment Annual operating expenses Useful Life New Baghouse $1,140,000 $115,500 10 years New ESP $992,500 $73,200 10 years The MARR is 9% per year. Make a recommendation regarding which alternative to select.arrow_forwardAdvanced 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) $9,000 Market (salvage) value Life 4 yearsarrow_forwardImagineering, Inc., is considering an investment in CAD-CAM compatible design software with the cash flow profile shown in the table below. Imagineering’s MARR is 23 %/year. End of Year Cash Flow (M$) 0 -$12 1 -$1 2 $5 3 $2 4 $5 5 $5 6 $2 7 $5 Note:- 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. What is the future worth of this investment? $arrow_forward
- Two 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_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_forwardAn 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 orarrow_forward
- An aerodynamic three-wheeled automobile (the Dart) runs on compressed natural gas stored in two cylinders in the rear of the vehicle. The $15,000 Dart can cruise at speeds up to 85 miles per hour, and it can travel 95 miles per gallon of fuel. Another two-seater automobile costs $11,000 and averages 45 miles per gallon of compressed natural gas. If fuel costs $8.00 per gallon and MARR is 12% 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 12% per year. Dart is more economical if you are planning on driving miles or more per year. (Round to the nearest whole number.)arrow_forwardA new highway is to be constructed. Design A calls for a concrete pavement costing $85 per foot with a 16-year life; three paved ditches costing $4 per foot each; and four box culverts every mile, each costing $8,000 and having a 16-year life. Annual maintenance will cost $1,700 per mile; the culverts must be cleaned every four years at a cost of $400 each per mile. Design B calls for a bituminous pavement costing $40 per foot with a 8-year I four sodded ditches costing $1.45 per foot each; and two pipe culverts every mile, each costing $2,200 and having a 8-year life. The replacement culverts will cost $2,500 each. Annual maintenance will cost $2,600 per mile; the culverts must be cleaned yearly at a cost of $220 each per mile; and the annual ditch maintenance will cost $1.65 per foot per ditch. Compare the two designs on the basis of equivalent worth per mile for a 16-year period. Find the most economical design on the basis of AW and PW if the MARR is 8% per year. Click the icon to…arrow_forwardOne of the mutually exclusive alternatives below must be selected. Base your recommendation on A(Sauer-Glock) cash flows when the MARR = 8% per year. Q Q Q 0 P ΕΟΥ 10 P Glock 40 The IRR on A(Sauer-Glock) is %. (Round to two decimal places.) 20 OU C 2P ΕΟΥ 10 Sauer 45 P/4 1 20arrow_forward
- Consider the five investment alternatives described below. Which alternatives can be eliminated from an incremental ROR analysis by applying short cuts for an investor with a MARR of 10%? Each alternative has a 5-year life and no salvage value. Initial cost Alternative ROR (%) (Sk) 60 14 45 20 50 18 D 30 25 75 12 Can eliminate do-nothing and C Can eliminate do-nothing and A Can eliminate do-nothing and E Can eliminate do-nothing onlyarrow_forwardOne of the mutually exclusive alternatives below must be selected. Base your recommendation on A(Sauer-Glock) cash flows when the MARR=6% per year Q EOY a EOY P/5 ♡ 10 20 0 10 J 20 P 2P Glock 40 Sauer 45 The IRR on A(Sauer-Glock) is 13% (Round to two decimal places)arrow_forwardMary, a project manager for ABC Ic., is reviewing a product quality improvement project. She has determined that the project's Annual Worth of $3,396. for a period of 8 years. She now has to calculate the IRR for the project but unfortunately she has lost some information about the cash flows. She knows only that the project has: a 8-year project life with an initial cost of $400,000. a set of equal revenue cash flows occurred at the end of each year for 8 years, and • MARR used for calculation the Annual Worth was 8%. Find the annual revenue first and then calculate the IRR for the project = ? O 14% < IRR (i*) < 15% O 13% < IRR (i*) < 14% O 10% < IRR (i*) < 11% O 9% < IRR (i*) < 10% O 8% < IRR (i*) < 9%arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education
Valuation Analysis in Project Finance Models - DCF & IRR; Author: Financial modeling;https://www.youtube.com/watch?v=xDlQPJaFtCw;License: Standard Youtube License