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
Textbook Question
Chapter 6, Problem 45P
A piece of production equipment is to be replaced immediately because it no longer meets quality requirements for the end product. The two best alternatives are a used piece of equipment (E1) and a new automated model (E2). The economic estimates for each are shown in the accompanying table.
The MARR is 15% per year.
- a. Which alternative is preferred, based on the repeatability assumption? (6.5)
- b. Show, for the coterminated assumption with a five-year study period and an imputed market value for Alternative B, that the AW of B remains the same as it was in Part (a). [And obviously, the selection is the same as in Part (a).] Explain why that occurs in this problem. (6.5)
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
As supervisor of a facilities engineering department, you consider mobile cranes to be critical equipment. The purchase of a new, medium-sized truck-mounted crane is being evaluated. The economic estimates for the two best alternatives are shown in the following table. MARR is at 15% per year. You can use the assumption of repeatability in this case.
Show that the same selection is made for the following methods:a. RORAI method
b. AWC method
c. PW method
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)
An agricultural land requires a 20PK motor to pump water from a water sources. The number of operating hours (motor hours) each year depends on height rainfall, so the hours of operation are variable. The motor is used in the long term 4 years time. There are 2 alternatives proposed for the procurement of these motors:Alternative A:The cost of buying an automatic electric motorbike is Rp. 1,400 million with a final value of Rp. 200 million With a lifespan of 4 years. Operational costs of Rp. 840k per hour, and maintenance fee of Rp. 120 million per year.
Alternative B :The cost of purchasing a gasoline motorbike is Rp. 550 million with a final value of zero. With age used for 4 years.Operational costs consist of:• Gasoline costs Rp. 420k per hour• Maintenance fee of Rp. 150k per hour• Operator fee Rp. 800k per hourQuestion :Determine in how many hours each year the two motors must operate, in order to cost the two alternatives are equal. Use MARR 10% per year. When used during 1,000…
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
- 1.b 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. What is the ERR ( Ԑ=MARR) of this proposal? show whole solution, not in excel pleasearrow_forwardA recent graduate who wants to start an excavation/earth-moving business is trying todetermine which size of used dump truck to buy. As the bed size increases, new incomeincreases; however, the graduate is uncertain whether the incremental expenditure requiredfor larger truck is justified. The cash flows associated with each size truck are estimated below.The contractor has established a MARR of 18% per year, and all trucks are expected to have aremaining economic life of 5 years. Using a Do Nothing (DN) option, using SPREADSHEET only,a. Determine which size truck should be purchased.b. If two trucks are to be purchased, what should be size of the second truck?arrow_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
- Consider the following two investment alternatives. Determine the range of investment costs for Alternative B (i.e., min. valuearrow_forwardA supermarket chain buys loaves of bread from its supplier at $0.50 per loaf. The chain is considering two options to bake its own bread. Neither machine has a market value at the end of seven years, and MARR is 12% per year. Use this information to answer (Select the closest answer), What is the minimum number of loaves that must be sold per year to justify installingMachine A instead of buying the loaves from the supplier? (a) 7,506 (b) 22,076 (c) 37,529 (d) 75,059 (e) 15,637.arrow_forwardAn 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_forwardWe have the following K-T conditions: 1-10z + 3 – 6A 0 & x(10z+ 3 – 6) = 0 2-10x +1 – 31 0 & z(10x +1– 3) = 0 3-3 – 6x – 3z >0 & \>0 & \(3– 6x %D Which of the following best represents the problem associated with those K-T conditions? min(2.2) 10xz + 3x + z such that 3 6x + 3z Omin(r,2) 10æz + 3x + z such that 3 > 6x + 3zarrow_forwardBulaklak Oil Company must install anti-pollution equipment in a new refinery in Bataan to meet clean air legislation. It is considering three types of equipment, and the following data are available:Use MARR = 20%, repeatability assumption and solution by PW.arrow_forwardNowadays it is very important to reduce one's carbon footprint" (how much carbon we produce in our daily lifestyles). Minimizing the use of fossil fuels and instead resorting to renewable sources of energy (e.g., solar energy) are vital to a "sustainable" lifestyle and a lower carbon footprint. Let's consider solar panels that prewarm the water fed to a conventional home water heater. The solar panels have an installed cost of $2,436, and they reduce the homeowner's energy bill by $30.5 per month. The residual value of the solar panels is negligible at the end of their 8-year life. What is the annual effective IRR of this investment? The annual effective IRR of this investment is%. (Round to two decimal places.) please explain using excelarrow_forwardYou 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? (Upload the picture of your complete solutions including the correct cash flow diagram and your conclusion.)arrow_forwardYou 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? include the cash flow diagram and conclusionarrow_forwardA Company wants to prioritize the efficiency and effectiveness of its company. On the advice of the Technical Manager, Naufal Fahmi, to save energy by installing a device that costs Rp. 200 million. The tool is estimated to provide savings of Rp. 10 million/year in the first 2 years, then increased to Rp. 12 million/year for the next 5 years, and Rp. 15 million in the following years. If the age of the tool is 10 years. If MARR=6% a. Create cashflow from this case b. Should this decision be made?arrow_forwardarrow_back_iosSEE MORE QUESTIONSarrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering 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 LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial 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