Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Chapter 9, Problem 8P
A city water and waste-water department has a four-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an additional four years, or it can be sold for $35,000 and replaced by a new pump. The purchase price of the replacement pump is $50,000. The projected MVs and operating and maintenance costs over the four-year planning horizon are shown in the table that follows. Assuming the MARR is 10%, (a) determine the economic life of the challenger and (b) determine when the defender should be replaced.
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solve it using manual computation; do not use Microsoft Excel
The Ajax Corporation has an overhead crane that has an estimated remaining life of 10 years. The crane can be sold now for $8,000. If the crane is kept in service, it must be overhauled immediately at a cost of $5,000. Operating and maintenance costs will be $3,000 per year after the crane is overhauled. The overhauled crane will have zero MV at the end of the 8-year study period. A new crane will cost $20,000, will last for 8 years, and will have a $4,000 MV at that time. Operating and maintenance costs are $1,000 per year for the new crane. The company uses a before-tax interest rate of 10% per year in evaluating investment alternatives. Should the company replace the old crane?
PROBLEM:
A company that sells computers has proposed to a public utility company that it purchase a small
electronic computer for 1,000,000 to replace ten calculating machines and their operators. An annual
service maintenance contract for the computer will be provided at a cost of 100,000 per year. One
operator will be required at a salary of 96,000 per year and one programmer at a salary of 144,000 per
year. The estimated economic life of the computer is 10 years.
The calculating machine costs 7,000 each when new, 5 years ago, and presently can be sold for 2,000
each. They have an estimated life of 8 years and an expected ultimate trade-in value of 1,000 each. Each
calculating machine operator receives 84,000 per year. Fringe benefits for all labor cost 8% of annual
salary. Annual maintenance costs on the calculating machines have been 500 each. Taxes and insurance
on all equipment is 2% of the first cost per year.
If capital costs the company about 25%, would you recommend the…
Suppose the reader has an old car, which is a gas guzzler. It is 10 years old and could sell for $400 cash to a local dealer. Assume that your MV in two years is zero. For the foreseeable future, annual maintenance expenses will average $800, and the car will get only 10 miles per gallon. Gasoline costs $1.50 per gallon, and the car is used an average of 15,000 miles per year. You now have the opportunity to replace your old car with a better one that costs $8,000. If I bought it, I would pay cash. Maintenance costs are expected to be negligible since it has a two-year warranty. This car averages 30 miles per gallon. Use the IRR method to determine which alternative should be selected. Use a two-year analysis period and assume that the new vehicle can sell for $5,000 at the end of year two. The MARR is 15% per year. Mention any other assumptions you make.
Chapter 9 Solutions
Engineering Economy (17th Edition)
Ch. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - A city water and waste-water department has a...Ch. 9 - Prob. 9PCh. 9 - Prob. 10P
Ch. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - Use the PW method to select the better of the...Ch. 9 - Prob. 14PCh. 9 - Prob. 15PCh. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 21PCh. 9 - Prob. 22PCh. 9 - Prob. 23PCh. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Prob. 26PCh. 9 - Prob. 27SECh. 9 - Prob. 28SECh. 9 - Prob. 29CSCh. 9 - Prob. 30CSCh. 9 - Prob. 31CSCh. 9 - Prob. 32FECh. 9 - Prob. 33FECh. 9 - Prob. 34FECh. 9 - Prob. 35FECh. 9 - Prob. 36FE
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