ized. The loss of head due to friction for the 26-inch pipeline will be 67 feet. The energy of the water delivered to the turbine is valued at $84 per horsepower year, where horsepower h is the head in feet and F is the flow in cubic feet taxes amount to 3% of first cost. Operating and maintenance costs are essen- tially equal or all three plans. The interest rate is 12%. If all lines, including the one now in use, will be retired in 35 years with no salvage value, what is the comparable AE(i) costs of the three alternatives? h X FX 62.4 ÷ 550. In this equation, %3D per second. Insurance and 17.) A university is considering upgrading its computing capabilities. The com- puter that is now owned was purchased 2 years ago at a cost of $500,000. It was anticipated at the time of the purchase that annual operating costs would be $80,000, and that after 6 years of use the computer would be inadequate and therefore would be sold for $90,000. The existing unit has now a salvage value of $180,000 and, if retained for 4 more years, will have a salvage value of $40,000 at the end of that time. Its operating costs will increase at a rate of 3% per year from the current level of $80,000, and it will have to be supplement- ed immediately with a medium-size computer having initial cost, life, sal- vage value, and operating costs of $100,000, 5 years, $30,000, and $19,000, respectively. A new, larger computer with the desired capacity can be bought for $420,000. It is estimated that it will have a service life of 5 years, final salvage value of $120,000, and operating costs of $50,000 per year. As an alternative to these options, there is a possiblity of leasing a com- puter with sufficient capacity for a 4-year period. This alternative will require an initial payment of $10,000 and will have total lease costs of $140,000 payable at the beginning of each year. If the MARR is 12%, indicate the preferred alternative for a 4-year
ized. The loss of head due to friction for the 26-inch pipeline will be 67 feet. The energy of the water delivered to the turbine is valued at $84 per horsepower year, where horsepower h is the head in feet and F is the flow in cubic feet taxes amount to 3% of first cost. Operating and maintenance costs are essen- tially equal or all three plans. The interest rate is 12%. If all lines, including the one now in use, will be retired in 35 years with no salvage value, what is the comparable AE(i) costs of the three alternatives? h X FX 62.4 ÷ 550. In this equation, %3D per second. Insurance and 17.) A university is considering upgrading its computing capabilities. The com- puter that is now owned was purchased 2 years ago at a cost of $500,000. It was anticipated at the time of the purchase that annual operating costs would be $80,000, and that after 6 years of use the computer would be inadequate and therefore would be sold for $90,000. The existing unit has now a salvage value of $180,000 and, if retained for 4 more years, will have a salvage value of $40,000 at the end of that time. Its operating costs will increase at a rate of 3% per year from the current level of $80,000, and it will have to be supplement- ed immediately with a medium-size computer having initial cost, life, sal- vage value, and operating costs of $100,000, 5 years, $30,000, and $19,000, respectively. A new, larger computer with the desired capacity can be bought for $420,000. It is estimated that it will have a service life of 5 years, final salvage value of $120,000, and operating costs of $50,000 per year. As an alternative to these options, there is a possiblity of leasing a com- puter with sufficient capacity for a 4-year period. This alternative will require an initial payment of $10,000 and will have total lease costs of $140,000 payable at the beginning of each year. If the MARR is 12%, indicate the preferred alternative for a 4-year
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Answer all parts
Transcribed Image Text:ized. The loss of head due to friction for the 26-inch pipeline will be 67 feet.
of the water delivered to the turbine is valued at $84 per
= h X F X 62.4 ÷ 550. In this equation,
The
energy
horsepower year, where horsepower
h is the head in feet and F is the flow in cubic feet
taxes amount to 3% of first cost. Operating and maintenance costs are essen-
tially equal or all three plans. The interest rate is 12%. If all lines, including the
one now in use, will be retired in 35 years with no salvage value, what is the
comparable AE(i) costs of the three alternatives?
per
second. Insurance and
A university is considering upgrading its computing capabilities. The com-
puter that is now owned was purchased 2 years ago at a cost of $500,000. It
was anticipated at the time of the purchase that annual operating costs would
be $80,000, and that after 6 years of use the computer would be inadequate and
therefore would be sold for $90,000. The existing unit has now a salvage value
of $180,000 and, if retained for 4 more years, will have a salvage value of
$40,000 at the end of that time. Its operating costs will increase at a rate of 3%
per year from the current level of $80,000, and it will have to be supplement-
ed immediately with a medium-size computer having initial cost, life, sal-
vage value, and operating costs of $100,000, 5 years, $30,000, and $19,000,
respectively.
17.
A new, larger computer with the desired capacity can be bought for
$420,000. It is estimated that it will have a service life of 5 years, final salvage
value of $120,000, and operating costs of $50,000 per year.
As an alternative to these options, there is a possiblity of leasing a com-
puter with sufficient capacity for a 4-year period. This alternative will require
an initial payment of $10,000 and will have total lease costs of $140,000 payable
at the beginning of each year.
If the MARR is 12%, indicate the preferred alternative for a 4-year
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