ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
Chapter 5, Problem 24P
(a)
To determine
To find:The truck that the firm should buy out of the two models, Model A and Model B.
(b)
To determine
Introduction: The second part requires to decide what the firm should do in the event of the dealer sells out of Model B.
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Appledale Dairy is considering upgrading an old ice-cream maker. Moderate upgrading costs $7050 now and yields annual savings of $4800 in the first year, and decreases by $300 dollars every year after that. If the upgraded ice-cream maker will last for seven years, what is the present worth of the upgrading option? Use a present worth comparison. Appledale's MARR is 9 percent.
Please choose one of the following options. Double check your work. There is no additional information. This is the question and those are your options. PW analysis stands for Present Worth Analysis. It is a term used in engineering economics.
What will be the total lifetime for every project if we compare them with PW analysis? Project A has a lifetime of 9 years, project B has a lifetime of 7 years, and project C has a lifetime of 3 years.
9
189
126
27
63
Determine which option, if any, should be chosen based on net present worth using a 8% interest rate. Use Repeatability Method.
a. The Net Present Worth of Alternative A is = $ Blank 1
b. The Net Present Worth of Alternative B is = $ Blank 2
c. Choose Alternative (Type only A or B) = Blank 3
Note: Show final answer in two decimal places and complete solution
Chapter 5 Solutions
ENGR.ECONOMIC ANALYSIS
Ch. 5 - Prob. 1QTCCh. 5 - Prob. 2QTCCh. 5 - Prob. 3QTCCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Prob. 6PCh. 5 - Prob. 7P
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- Your company is determing whether or not it should invest in a new pallet wrapping station. The station would cost $6,500 and your company's MARR is 13%. You estimate the purchasing a pallet wrapper would save you $2,000 in labor annually, and at the end of 3 years you would realize a salvage value of $400. How would you calculate the present worth of this investment in Excel?arrow_forwardWhat is the discounted payback period? How many percent of the initial capital is recovered after 3 years?arrow_forwardPLEASE USE EXCEL AND SHOW FORMULAS: A new engineer is evaluating whether to use a larger diameter pipe for a water line. The pipe will cost $376,183 more initially but will reduce pumping costs. The optimistic, most likely, and pessimistic projections for annual savings are $30,000, $20,000, and $5000, with respective probabilities of 20%, 50%, and 30%. The interest rate is equally likely to be 6% or 8% (use 7% as most likely), and the water line should have a life of 40 years. a) Find the PW for the pessimistic case, the most likely case, and the optimistic case. Then determine the Expected PW based on these. b) Find the expected annual savings and the expected interest rate. Determine the Expected PW based on these.arrow_forward
- A new design of aircraft saves annually fuel consumption of 45,000 gallons of fuel costing$6 per gallon. The new design costs $1 million to accomplish. The airline company’s MARRis 10%. Considering only the fuel savings.What is the simple payback period for the new design? What is the discountedpayback period?arrow_forwardKiwidale Dairy is considering purchasing a new ice-cream maker. Two models, Smoothie and Creamy, are available and their information is given below (all costs and profits are in dollars): Smoothie Creamy $17500 $37000 14 years $3500 $1000 $4000 First Cost Service Life Annual Profit Annual Operating Cost Salvage Value 12 years $10500 $3050 $4200 Calculate the present worth of the smoothie machine for one life cycle (no repeated lives), if the interest rate is 10%. Round your answer to two decimal places.arrow_forwardQuestion 7 Question 4.30 Problem Value = 5 Diana usually uses a three-year payback period to determine if a project is acceptable. A recent project with uniform yearly savings over a five-year life had a payback period of almost exactly three years, so Diana decided to find the project's present worth to help determine if the project was truly justifiable. However, that calculation didn't help either since the present worth was exactly 0. What interest rate was Diana using to calculate the present worth? The project has no salvage value at the end of its five-year life. Diana's interest rate was (just input the number...and round to the nearest whole pecent): ____________% [5/5]arrow_forward
- A risk free private bond with a face value of 10,000 will mature in 1 year. If the market interest rate is 25% then a) the maximum price you are willing to pay for it is 5000. b) you should buy if the price is higher than 9000. c) you should buy if the price is lower than 5000 d) All of the answers are correct.arrow_forwardAt expiration, if you have been diligently delta hedging,, the delta of an option will be: A. 100% if it's in the money and exercised or Zero if it expires out-of-the-money B. 100% if it expires out-of-the-money or zero if it's in the money and exercised C. It depends if you exercise it, sometimes even if an option is in the money at expiration you may chose not to exercise it because you did not cover the cost of your premium. D. You should not be delta hedging if you have a good idea of where ithe underlying is goingarrow_forwardPlease no written by hand Appledale Dairy is considering upgrading an old ice-cream maker. Upgrading is available at two levels: moderate and extensive. Moderate upgrading costs $6500 now and yields annual savings of $3300 in the first year, $3000 in the second year, $2700 in the third year, and so on. Extensive upgrading costs $10 550 and saves $7600 in the first year. The savings then decrease by 20 percent each year thereafter. If the upgraded icecream maker will last for seven years, which upgrading option is better? Use a present worth comparison. Appledale’s MARR is 8 percent.arrow_forward
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