Chapter 6

Annual Worth Analysis

Solutions to Problems
6.1 The estimate obtained from the three-year AW would not be valid, because the
AW calculated over one life cycle is valid only for the entire cycle, not part of the
cycle. Here the asset would be used for only a part of its three-year life cycle.
6.2 -1,!A"#,1$,%& ' ( ) -1,!A"#,1$,2& ' ( * +!A",,1$,2&
-1,!.-211& ' ( ) -1,!..(61/& ' ( * +!.-(61/&
+ ) 0%6.6
6.% AW12 ) -26,!A"#,1.$,%& ' 2 * 12,!A",,1.$,%&
) -26,!.-%(/3& ' 2 * 12,!.23(/3&
) 0-//%2
AW,ord ) -2/,!A"#,1.$,%& ' 12 * 1.,!A",,1.$,%&
) -2/,!.-%(/3& ' 12 * 1.,!.23(/3&
) 0-/.32
#urchase the ,ord +45.
6.- AWcentrifu6e ) -2.,!A"#,1$,6& ' %1, * -,!A",,1,6&
) -2.,!.22/61& ' %1, * -,!.12/61&
) 0-3%,213
AWbelt ) -1(,!A"#,1$,-& ' %., ' 26,!#",,1$,2&!A"#,1$,-&
* 1,!A",,1$,-&
) -1(,!.%1.-(& ' %., ' 26,!.362-&!.%1.-(&
* 1,!.21.-(&
) 0-/%,.-/
+elect centrifu6e.
6.. AWsmall ) -1,(,!A"#,1$,12& ' 12, * 1(,!A",,1$,12&
) -1,(,!.1-%.& ' 12, * 1(,!.-%.&
) 0-%.,6.6
AWlar6e ) -2,1,!A"#,1$,12& ' 3, * 21,!A",,1$,12&
) -2,1,!.1-%.& ' 3, * 21,!.-%.&
) 0-%(,222
+elect small pipeline.
7hapter 6 1
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reproduced or distributed in any form or by any means, without the prior written permission of the publisher, or used beyond the
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usin6 this 2anual, you are usin6 it without permission.
6.6 AWA ) -2,,!A"#,1$,%6& ' . *2,!A",,1$,%6&
) -2,,!.%%21& ' . *2,!.2%21&
) 0-66,((3
AW; ) -2.,!A"#,1$,%6& ' -.,!#"A,1$,3&!A"#,1$,%6&
- 1,!#"A,1$,23&!#",,1$,3&!A"#,1$,%6&
) -2.,!.%%21& ' -.,!(.6.1(&!.%%21&
- 1,!2-.%16-&!./2%.&!.%%21&
) 0-1/,(2%
+elect plan ;.
6.( AW< ) -3.,!A"#,12$,%& ' %, * -,!A",,12$,%&
) -3.,!.-16%.& ' %, * -,!.2/6%.&
) 0-.%,.%6
AW= ) -/(,!A"#,12$,%& ' 2(, * -3,!A",,12$,%&
) -/(,!.-16%.& ' 2(, * -3,!.2/6%.&
) 0-.%,161
+elect robot = by a small mar6in.
6.3 AWA ) -2.,!A"#,12$,2& ' -
) -2.,!../1(& ' -,
) 0-13,(/%
AW; ) -33,!A"#,12$,6& ' 1-
) -33,!.2-%2%& ' 1-
) 0-22,3-
+elect plan A.
6./ AW< ) -(6.!A"#,12$,2& ' 12
) -(6.!../1(& ' 12
) 0-.(26..1
AW= ) -12,/!A"#,12$,-& ' / * 2!A",,12$,-&
) -12,/!.%2/2%& ' / * 2!.2/2%&
) 0--(23.61
+elect plan =.
7hapter 6 2
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usin6 this 2anual, you are usin6 it without permission.
6.1 AW7 ) --,!A"#,1.$,%& ' 1, * 12,!A",,1.$,%&
) --,!.-%(/3& ' 1, * 12,!.23(/3&
) 0-2-,6%
AW> ) -6.,!A"#,1.$,6& ' 12, * 2.,!A",,1.$,6&
) -6.,!.26-2-& ' 12, * 2.,!.11-2-&
) 0-26,%2
+elect machine 7.
6.11 AW? ) -16,!A"#,1$,2-& ' ( * -,!A",,1$,2-&
) -16,!.-((& ' ( * -,!.%((&
) 0-1%,-3
AW@ ) -21,!A"#,1$,-3& ' . * 26,!A",,1$,-3&
) -21,!.26%%& ' . * 26,!.16%%&
) 0-1,1.
+elect process @.
6.12 AWA ) --2,!A"#,1$,2& ' 6
) --2,!..(61/& ' 6
) 0-%,2
AWB ) -3,!A"#,1$,-& ' C( * 1!A"1,1$,-&D * -!A",,1$,-&
) -3,!.%1.-(& ' C( * 1!1.%312&D * -!.21.-(&
) 0-%2,(.(
+elect proEect A.
6.1% AWland ) -11,!A"#,12$,%& '/., * 1.,!A",,12$,%&
) -11,!.-16%.& '/., * 1.,!.2/6%.&
) 0-1%6,%.%
AWincin ) -3,!A"#,12$,6& '6, * 2.,!A",,12$,6&
) -3,!.2-%2%& '6, * 2.,!.12%2%&
) 0-22%,(((
AWcontract ) 0-1/,
4se land application.
7hapter 6 %
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usin6 this 2anual, you are usin6 it without permission.
6.1- AWhot ) -C!(&!%& * 2-,D!A"#,3$,2& ' .
) -2%-,!..6((& ' .
) 0-1%6,22
AWresurface ) -3.,!A"#,3$,1& ' 2!#"A,3$,3&!#",,3$,2&!A"#,3$,1&
) -3.,!.1-/%& ' 2!..(-66&!.3.(%&!.1-/%&
) 0-123,1--
Besurface the road.
6.1. ,ind # in year 2/, move bacF to year /, and then use A", for n ) 1.
A ) C3,".1D!#",,1$,2&!A",,1$,1&
) C3,".1D!.1-36&!.62(.&
) 0 (-./.(2
6.16 AW1 ) 1,!A"#,1$,1&
) 1,!.11&
) 01,1
AWG ) 1,!.1&
) 01,
>ifference is 01.
6.1( ,irst find the value of the account in year 11 and then multiply by i ) 6$.
,11 ) 2,!,"#,1.$,11& * -,!,"#,1.$,/& * 1,!,"A,1.$,3&
) 2,!-.6.2-& * -,!%..1(/& * 1,!1%.(263&
) 0%(1,%2
A ) %(1,%2!.6&
) 022,262
6.13 AW ) .,!.1& * ., ) 0..,
6.1/ AW ) -1,!.3& '.,!A",,3$,.&
) -1,!.3& '.,!.1(-6&
) 0-16,.2%
6.2 #erpetual AW is eHual to AW over one life cycle
AW ) -C6!#"A,3$,23& * 1!#"1,3$,23&D!#",,3$,2&!A"#,3$,%&
) -C6!11..11& * 1!/(..63(&D!.3.(%&!.333%&
) 0-12,-3
7hapter 6 -
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reproduced or distributed in any form or by any means, without the prior written permission of the publisher, or used beyond the
limited distribution to teachers and educators permitted by 2c1raw-Hill for their individual course preparation. 9f you are a student
usin6 this 2anual, you are usin6 it without permission.
6.21 #-1 ) 1,,!#"A,1$,11& * 1,!#"1,1$,11&
) 1,,!6.-/.1& * 1,!26.%/6%&
) 0/,1%-,(%
Amt in yr 1 ) /,1%-,(%!,"#,1$,11&
) /,1%-,(%!2.3.%1&
) 026,62,2/3
AW ) 26,62,2/3!.1&
) 02,66,2%
6.22 ,ind # in year '1, move to year /, and then multiply by i. Amounts are in 01.
#-1 ) C1!#"A,12$,(& ' 1!#"1,12$,(&D!,"#,12$,1&
) C1!-..6%3& ' 1!11.6--%&D!%.1.3&
) 01...(3
A ) 1...(3!.12&
) 0126.6/
6.2% !a& AWin-house ) -%!A"#,1.$,1& ' . * 1- * (!A",,1.$,1&
) -%!.1//2.& ' . * 1- * (!.-/2.&
) 0%.%( !0 millions&
AWlicense ) -2!.1.& '.2 * 1..
) 01. !0 millions&
AWcontract ) -2 * 2..
) 0.. !0 millions&
+elect in-house option.
!b& All three options are acceptable.
FE Reie! Solutions
6.2- Answer is !b&
6.2. ,ind #W in year and then multiply by i.
#W ) ., * 1,!#"A,1$,1.& * !2,".1&!#",,1$,1.&
) ., * 1,!(.661& * !2,".1&!.2%/-&
) 01(%,/-1
7hapter 6 .
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reproduced or distributed in any form or by any means, without the prior written permission of the publisher, or used beyond the
limited distribution to teachers and educators permitted by 2c1raw-Hill for their individual course preparation. 9f you are a student
usin6 this 2anual, you are usin6 it without permission.
AW ) 1(%,/-1!.1&
) 01(,%/-
Answer is !c&
6.26 A ) C-,".3D!#",,3$,2&!A",,3$,%&
) C-,".3D!.3.(%&!.%3%&
) 01%2,%(
Answer is !d&
6.2( A ) C.,".1D!#",,1$,2&!A",,1$,1&
) C.,".1D!.1-36&!.62(.&
) 0-662
Answer is !b&
6.23 :oteI i ) effective 1$ per year.
A ) C1,!,"#,1$,.& ' 1,!,"A,1$,6&D!.1&
) C1,!1.61.& ' 1,!(.(1.6&D!.1&
) 03%3/
Answer is !b&
6.2/ i"year ) !1 * .1"2&
2
'1 ) 1.2.$
Answer is !d&
6.% i"year ) !1 * .1"2&
2
'1 ) 1.2.$
Answer is !d&
6.%1 AW ) -3,!.1& ' 1,
) 0-/,
Answer is !c&
7hapter 6 6
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Case Stu"y Solution
1. +preadsheet and chart are below. Bevised costs and savin6s are in columns ,-H.
7hapter 6 (
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2. 9n cell J%, the new AW ) 01(,/-. This is only sli6htly lar6er than the #owr4p
AW ) 01(,..3. 2ar6inally select @loydKs.
%. :ew 7B ) 0-(1(%, which is an increase from the 0-(2. previously displayed in
cell J3.
7hapter 6 3
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