Two mutually exclusive electricity generators are considered for purchase by XYZ company. Information relevant to compare the alternatives are summarized below. Which one should be selected for purchase using IRR method? The MARR is 10% per year. Generator A Generator B 100,000 Capital Investment (OMR) Market value at the end of useful life 80,000 35,000 10,000 (OMR) Annual fuel and 3,000 5,000 maintenance expenses (OMR) Service life 10 years 10 years Hints: You should solve using IRR only. Your answers should be presented in a form of a Table. Show the iteration and interpolation procedure presented in

Two mutually exclusive electricity generators are considered for purchase by XYZ company. Information relevant to compare the alternatives are summarized below. Which one should be selected for purchase using IRR method? The MARR is 10% per year. Generator A Generator B 100,000 Capital Investment (OMR) Market value at the end of useful life 80,000 35,000 10,000 (OMR) Annual fuel and 3,000 5,000 maintenance expenses (OMR) Service life 10 years 10 years Hints: You should solve using IRR only. Your answers should be presented in a form of a Table. Show the iteration and interpolation procedure presented in

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Complete the following analysis of cost alternatives and select the preferred alternative. The s A D Сapital investment $15,000 S16,000 $13,000 $18,000 Annual costs Market value 250 300 500 100 1,000 1,300 1,750 2,000 at EOY 10 FW(12%) -$49,975 –$53,658 ??? –$55,660 tudy period is 10 years and the MARR = 12% per %3D year.
For the following table, if the MARR is 10% per year and a useful life for each alternative of six years that equals the study period. The rank order of alternatives from least capital investment to greatest capital investment is Do nothing Fill the table with the missing values. > A C в Do nothing > A ? (2) ? (4) A capital investment A annual revenues A annual costs A market value A IRR -15,000 -2000 -3000 4,000 900 460 -150 -1,000 6,000 -100 -2,220 3,350 ? (5) (6) 12.7% 10.9% Alternative chosen (1) (3) 1. write the alternative chosen 2. write the two alternatives compared 3. write the alternative chosen 4. write the two alternatives compared 5. what is IRR incremental (final answer) 6. write the alternative chosen
Given the following pertinent data for four alternatives, what is the best alternative using the incremental ROR method given MARR=10% Initial Cost Annual CF, $ Life, years 30 O Alt. A Alt. B O Alt. C A O Alt. D B +22,000 +35,000 с -200,000 -275,000 -190,000 -331,350 30 D +19500 +42,000 30 30
If the MARR=10%, compute the value of X that makes the alternatives equally desirable. Do not use spreadsheets. Alternatives Machine A Machine B First cost $12,000 $20,000 Annual Operating cost $1,400/year X Salvage value $2,000 $3,000 Life 4 years 8 years
A project is being planned that has an initial investment at time 0, annual revenuesand expenses, and a salvage value at the end of the project lifespan (20 years). The financialvalues are summarized below:Initial investment amount at time 0 $150,000Estimated annual revenue $34,500 per yearEstimated annual expenses $8,700 per yearEstimated salvage value at end of lifespan $10,000Minimum attractive rate of return (MARR) 15%a. Calculate the capital recovery amount CR(i%).b. Using the annual worth (AW) method, determine whether purchasing the equipmentis economically justified.c. Repeat part (a) using the internal rate of return (IRR) method based on annual worth(AW).d. Using the present worth (PW) method, determine the break-even time period afterwhich purchase of the equipment generates a profit. (Find N when PW = 0) year period.
Consider two air-conditioning systems with the cash flow estimates as given below. Use AW analysis to determine the sensitivity of the economic decision to MARR values of 4%, 6%, and 8% per year. Air-Conditioning System 1 System First cost, $ AOC. $ per year Salvage valué, $ New compressor and motor cost at midlife, $ Life, years -9,000 -850 -100 Proy -2,200 8 The annual worth of air-conditioning system 1 when the MARR is 4% is $ The annual worth of air-conditioning system 2 when the MARR is 4% is $ The annual worth of air-conditioning system 1 when the MARR is 6% is $ The annual worth of air-conditioning system 2 when the MARR is 6% is $ 10 www Air-Conditioning System 2 -13,000 -105 -300 -3,140 12
QUESTION 5 For the below ME alternatives, which machine should be selected based on the PW analysis. MARR-10%. First cost, $ Annual cost, $/year Salvage value, $ Life, years Answer the below questions: C-PW for machine C = QUESTION 4 First cost, $ Annual cost, $/year Salvage value, $ Life, years Machine A Answer the below questions: B- PW for machine B= Path: p 15000 8,055 4,000 Machine A First cost, $ Annual cost, $/year Salvage value, $ Life, years For the below ME alternatives, which machine should be selected based on the PW analysis. MARR=10% 15000 9,499 4,000 Machine B Machine A Answer the below questions: A-PW for machine A= 30000 6,000 5,000 22,701 8,590 4,000 Machine B 28,459 6,000 5,000 QUESTION 5 For the below ME alternatives, which machine should be selected based on the PW analysis. MARR=10%. Machine C Machine B 13,398 4,000 1,000 QUESTION 3 For the below ME alternatives, which machine should be selected based on the PW analysis. MARR-10% 30000 Machine C 6,000 5,000 10000…
Investment Cost Useful Life 15 years Market Value, aka salvage value (EOY 15) 3,000 Annual Operating Expenses Overhaul cost--EOY 5 Overhaul cost--EOY10 ('000s of $) 13,000 $19,553,380. NO. 1,000 $19,210,488. YES 200 Evaluate a combined cycle power plant on the basis of the PW method when the MARR is 12% per year. Pertinent cost data are shown in the table. Should the plant be built? 550 $19,553,380. Impossible to say without additional information. O $19,210,488. Impossible to say without additional information.
(b) Use the easiest technique to determine which one of the following alternatives should be selected. MARR = 10% and the chosen alternative is needed for 6 years. Write down any assumptions that you make. Alternative 1 2 Capital Investment Annual Revenues less Expenses Useful Life -$10,000 $6,000 -$15,000 $6,500 2 3
1. A replacement electric motor is being considered for purchased. It is capable of providing 200 hp. The pertinent data are follows: Cost - 3200 dollars Maintenance Cost per year - 50 dollars Life expectancy - 14years Salvage value - 1,452 dollars The motor is used for 400 h/year and the cost of electricity is 0.0 dollars/kWh. What is most nearly the effective annual cost using an interest rate of 10%
3. 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. Alternative B A Capital investment $272.000 $346.000 Annual expenses Useful life (years) | Salvage value 28.800 19,300 6. 25,000 40.000 Show that the same selection is made for the following methods: a. RORAI method
3. 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. Alternative B A Capital investment $272.000 $346.000 Annual expenses Useful life (years) | Salvage value 28.800 19,300 6. 25,000 40.000 Show that the same selection is made for the following methods: a. RORAI method b. AWC method c. EUAC method