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2. 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. Capital investment Annual expenses" Useful life (years) Market value (at end of life) Alternatives A B $272,000 $346,000 28,800 19,300 6 $25,000 $40,000 "Excludes the cost of an operator, which is the same for both alternatives. You have selected the longest useful life (nine years) for the study period and would lease a crane

2. 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. Capital investment Annual expenses" Useful life (years) Market value (at end of life) Alternatives A B $272,000 $346,000 28,800 19,300 6 $25,000 $40,000 "Excludes the cost of an operator, which is the same for both alternatives. You have selected the longest useful life (nine years) for the study period and would lease a crane

Introductory Circuit Analysis (13th Edition)
Introductory Circuit Analysis (13th Edition)
13th Edition
ISBN:9780133923605
Author:Robert L. Boylestad
Publisher:Robert L. Boylestad
Chapter1: Introduction
Section: Chapter Questions
Problem 1P: Visit your local library (at school or home) and describe the extent to which it provides literature...
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2. 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. Alternatives A B $272,000 $346,000 Capital investment Annual expenses" Useful life (years) 28,800 19,300 6 9 Market value (at end of life) $25,000 $40,000 "Excludes the cost of an operator, which is the same for both alternatives. 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 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. Show that the same selection is made with a. the PW method. b. the IRR method. 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? (E = MARR = 15%).
Transcribed Image Text:2. 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. Alternatives A B $272,000 $346,000 Capital investment Annual expenses" Useful life (years) 28,800 19,300 6 9 Market value (at end of life) $25,000 $40,000 "Excludes the cost of an operator, which is the same for both alternatives. 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 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. Show that the same selection is made with a. the PW method. b. the IRR method. 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? (E = MARR = 15%).
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