As the supervisor of a facilities engineering department, you consider mobile cranes to b critical equipment. The purchase of a new medium-sized truck-mounted crane is bein evaluated. The economic estimates for the two best alternatives are shown in th following table. You have selected the longest useful life (nine years) for the study perio and would lease a crane for the final three years under Alternative A. On the basis of the previous experience, the estimated annual leasing cost at that time wi be $66,000 per year (plus the annual expenses of $28,800 per year). The MARR is 150 per year. Alternatives A B $272,000 $346,000 $28,800 $19,300 6 9 $40,000 Capital investment Annual expenses a Useful life (years) Market value (at end of life) $25,000 a Excludes the cost of an operator, which is the same for both alternatives.
As the supervisor of a facilities engineering department, you consider mobile cranes to b critical equipment. The purchase of a new medium-sized truck-mounted crane is bein evaluated. The economic estimates for the two best alternatives are shown in th following table. You have selected the longest useful life (nine years) for the study perio and would lease a crane for the final three years under Alternative A. On the basis of the previous experience, the estimated annual leasing cost at that time wi be $66,000 per year (plus the annual expenses of $28,800 per year). The MARR is 150 per year. Alternatives A B $272,000 $346,000 $28,800 $19,300 6 9 $40,000 Capital investment Annual expenses a Useful life (years) Market value (at end of life) $25,000 a Excludes the cost of an operator, which is the same for both alternatives.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
100%
Show that the same selection is made with:
a. The PW Method
b. The
c. The ERR method
d. Would leasing crane A for nine years, assuming the same costs per year as for three years, be preferred over your present selection?
(ϵ = MARR = 15%)
Transcribed Image Text:As the 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. You have selected the longest useful life (nine years) for the study period
and would lease a crane for the final three years under Alternative A.
On the basis of the previous experience, the estimated annual leasing cost at that time will
be $66,000 per year (plus the annual expenses of $28,800 per year). The MARR is 15%
per year.
Alternatives
A
B
$272,000 $346,000
$28,800
$19,300
6
9
$40,000
Capital investment
Annual expenses a
Useful life (years)
Market value (at end of life)
$25,000
a Excludes the cost of an operator, which is the same for both alternatives.
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