Professional Documents
Culture Documents
6.1
AE (10%) = −$5, 000( A / P,10%, 6)
+[$2, 000( P / F ,10%,1) + "
+$2,500( P / F ,10%, 6)]( A / P,10%, 6)
= $1,103.50
6.2
AE (12%) = $20, 000( A / P,12%, 6) − $5, 000
−$3, 000( P / G ,12%,5)( P / F ,12%,1)( A / P,12%, 6)
= $4,303.13
6.3
AE (10%) = [−$3, 000 − $3, 000( P / A,10%, 2)
+$3, 000( P / A,10%, 4)( P / F ,10%, 2)
+$1, 000( P / G,10%, 4)( P / F ,10%, 2)]( A / P,10%, 6)
= $751.01
6.4
AE (13%) = [−$8, 000 + $2, 000( P / A,13%, 6)
+$1, 000( P / G,13%, 6) − $4, 000( P / F ,13%, 2)
−$2, 000( P / F ,13%, 4) − $1, 000( P / F ,13%, 6)]( A / P,13%, 6)
= $934.92
6.5
AE (8%) = −$5, 000( A / P,8%, 6) + $2, 000
−[($500 + $1, 000( P / A,8%, 2))( P / F ,8%, 2)
+$500( P / F ,8%,5)]( A / P,8%, 6)
= $421.37
6.6
AE (10%) A = −$2,500( A / P,10%,5) + $400
+$100( A / G,10%,5)
= −$78.47 (Reject)
AE (10%) B = −$4,500( A / P,10%,5) + $500
+[$2,500( P / F ,10%,1) + $1,500( P / F ,10%, 2)
+$500( P / F ,10%,3)]( A / P,10%,5)
= $338.57 (Accept)
AE (10%)C = [−$8, 000 − $2, 000( P / F ,10%,1)
" + $2, 000( P / F ,10%,5)]( A / P,10%,5)
= $162.77 (Accept)
AE (10%) D = [−$12, 000 + $2, 000( P / F ,10%,1)
+ " + $4, 000( P / F ,10%,5)]( A / P,10%,5)
= $1,868.31 (Accept)
6.7
AE (12%) = [−$500, 000 + $600, 000( P / F ,12%,1) + $400, 000( P / F ,12%, 2)
+$300, 000( P / F ,12%,3) + $200, 000( P / F ,12%, 4)]( A / P,12%, 4)
= $228,894
6.8
AE (13%) A = −$7,500( A / P,13%,3) + $15,500( A / F ,13%,3)
= $1,373.10 (Accept)
AE (13%) B = −$4, 000( A / P,13%,3) + $1,500
+$300( A / G,13%,3)
= $81.53 (Accept)
AE (13%)C = −$5, 000( A / P,13%,3) + $4, 000
−$1, 000( A / G,13%,3)
= $963.62 (Accept)
AE (13%) D = −$6, 600( A / P,13%,3) + $3,800
= $1, 004.70 (Accept)
6.9 Since the project has the same cash flow cycle during the project life, you just
can consider the first cycle.
6.10
$10, 000
CE (i ) = $10, 000( P / A,8%,10) + ( P / F ,8%,10)
0.06
= $77,199 + $67,101
= $144,300
6.12
CR (12%) = ($45, 000 − $9, 000)( A / P,12%, 4) + (.12)($9, 000)
= $11, 067
AE (12%)O&M = $15, 000 + $2, 000( A / G,12%,5)
= $18,549
AEC (12%) = $11, 067 + $18,549
= $29, 616
6.14
n Option 1 Option 2
0 -$600-$5,760
1 0 -$1,560
2 0 -$1,680
3 0 -$1,800
4 +$100 -$1,920
6.15 Given i = 6% compounded annually, N =12 years, the effective monthly rate is
0.06 = (1 + i )12 − 1
i = 0.487% per month
• Conventional System:
• IONETIC System:
6.16
(a)
AE (13%) = −$4, 000( A / P,13%, 4) + $1, 000
+ ( X − $1, 000)( P / F ,13%, 2)( A / P,13%, 4)
=0
AE (13%) = −$608.06 + 0.26328 X = 0
X = $2,309.55
(b)
AE (13%) = $5,500( A / P,15%, 4) − $1, 400
= $526.46 > 0
∴Accept project B.
6.17
• Option 1: Purchase-annual installment option:
6.18 The total investment consists of the sum of the initial equipment cost and the
installation cost, which is $135, 000 . Let R denote the break-even annual
revenue.
6.19
• Capital cost:
6.21 Given data: Total cost of building: $110 × 16 × 20 = $35, 200 , Salvage value =
$3,520, Annual taxes, insurance, maintenance = $2,112, Other operating cost
= $1,600, Number of engineer assigned = 3
6.22
• So,
• Motor I (Expensive)
6.24
• Option 1: Purchase units from John Holland
6.25
(a) Determine the unit profit of air sample test by the TEM (in-house).
• Sub-contract Option:
6.26
• Option 1: Pay employee $0.38 per mile (Annual cost: $8360)
• Option 2: Provide a car to employee:
6.27
• Capital costs:
6.28
• Minimum operating hours:
Let T denote the annual operating hours. Then the total kilowatt-hours
generated would be 40T . Since the value of the energy generated is
considered to be $0.08 per kilowatt-hour, the annual energy cost is
6.29
• Capital recovery cost:
6.30 Given: Investment cost = $7 million, plant capacity = 200, 000 1bs/hour, plant
operating hours = 3, 600 hours per year, O&M cost = $4 million per year, useful
life = 15 years, salvage value = $700,000, and MARR = 15%.
(a)
PW (15%) = −$7, 000, 000 + ( R − $4, 000, 000)( P / A,15%, 6)
= 3.7844 R − $22,137,900
=0
$5,849, 700
= $0.0081 per 1b
(200, 000)(3, 600)
Comments: The minimum processing fee per 1b should be higher before-tax basis.
6.31 Given: Investment = $3 million, plant capacity = 0.4 acre, useful plant
life = 20 years, salvage value = negligible, O&M cost = $250, 000 per year,
MARR = 10% compounded annually (or effective monthly rate of 0.7974%)
$602,379( A / F , 0.7974%,12)
= $162.83
295
6.32
• Annual total operating hours:
AEC (14%) = $85, 000, 000( A / P,14%, 25) + $6, 000, 000
= $18,367,364
6.33 Let X denote the average number of round-trip passengers per year.
• Capital costs:
Or
6.35
• Capital recovery cost for both motors:
($199 / yr)
= ($0.034) / kWh
58,188 kWh/yr
(b)
$1,851 + 1.4587T = $2, 221 + 1.4038T
0.0549T = 370
T = 6, 737 hours
6.36
• New lighting system cost:
AEC (12%) = $50, 000( A / P,12%, 20) + ($8, 000 + $3, 000)
= $17, 694
Annual savings from installing the new lighting system = $2, 306
6.38
• Equivalent annual cost:
6.39
(a)
AE (15%) A = [−$2,500 + $1, 000( P / F ,15%,1)
+ " + $400( P / F ,15%, 4)]( A / P,15%, 4)
= $216.06
AE (15%) B = [−$4, 000 + $100( P / F ,15%,1)]( A / P,15%, 4) + $1,500
= $129.40
∴ Project A is a better choice.
(b)
AE (15%) B = $129.40
6.41 Since the required service period is 12 years and the future replacement cost
for each truck remains unchanged, we can easily determine the equivalent
annual cost over a 12-year period by simply finding the annual equivalent cost
of the first replacement cycle for each truck.
6.42
(a) Number of decision alternatives (required service period = 5 years):
Alternative Description
(b) With lease, the O&M costs will be paid by the leasing company:
• For A1:
• For A2:
• For A3:
∴ A2 is a better choice.
6.43
• Option 1:
• Option 2:
• Capital investment :
• Supporting equipment:
(1 + 0.1)15 − 1 = 3.1772
• Operating cost:
• Capital investment:
• Supporting equipment:
$150, 000
AEC (10%) 2 = ( A / P,10%, ∞)
16.4494
= $912
(1 + 0.1)30 − 1 = 16.4494
• Operating cost:
A
(200)(12)(555) = (770.83) A
123
CR (11%) = [$4, 625 A − $1× 770.83 A]( A / P,11%, 25) + $1× 770.83 A × 0.11
= 542.44 A
4, 709.11
AEC (11%) = 542.44A +
A
4, 709.11
AEC (11%) = 542.44(2.9464) + = $3,196.51
2.9464
• Conventional method:
Blanking Method
Description Conventional Laser
Steel cost/part $14.98 $8.19
Transportation cost/part $0.67 $0.42
Blanking cost/part $0.50 $0.40
Capital cost/part $7.34 $5.72
Total unit cost $23.49 $14.73
It appears that the window frame production by the laser blanking technique
would save about $8.76 for each part produced. If Ford decides to make the
window frame in house, the part cost would range between $14.73 and $23.49,
depending upon the blanking method adopted. If Ford relies on an outside
supplier, the subcontracting work should be in this cost range. If Ford were
producing the window frames by the conventional method, the die investment had
already been made. In this case, one of the important issues is to address if it is
worth switching to the laser blanking this time or later. If Ford decides to go with
the laser blanking, it will take 6 months to reach the required production volume.
What option should Ford exercise to meet the production need during this start-up
period?
ST 6.3 Given: annual energy requirement = 145, 000, 000, 000 BTUs,1-metric ton
= 2, 204.6 l bs ( an approximation figure of 2,000 lbs was mentioned in the case
problem), net proceeds from demolishing the old boiler unit = $1, 000
• Alternative 2:
⎛ 145, 000, 000, 000(0.94) ⎞
Gas cost = $9.5 ⎜ ⎟
⎝ (0.78)(1, 000, 000) ⎠
= $1,660,064
$644,571
Unit cost = = $0.0044 per steam lb
145,000,000
• Alternative 2:
AEC (10%) = ($889, 200 − $1, 000)( A / P,10%, 20)
+$1, 764, 080
= $1,868, 408
$1,868, 408
Unit cost = = $0.0129 per steam lb
145,000,000
(c) Select alternative 1.
ST 6.4 Assuming that the cost of your drainage pipe has experienced a 4% annual
inflation rate, I could estimate the cost of the pipe 20 years ago as follow:
If the pipe had a 50-year service life with a zero salvage value when it was
placed in service 20 years ago, the annual capital recovery cost to the owner
would be as follows: (I assumed the owner’s interest rate would be 5% per year.
In other words, the owner could invest his $1,920.48 at 5% annual interest, if he
did not purchase the pipe.)
You can view this number as the annual amount he would expect to recover from
his investment considering the cost of money. With only a 20-year’s usage, he
still has 30 more years to go. So, the unrecovered investment at the current point
is
The owner could claim this number, but the city’s interest rate could be
different from the owner’s, so there is some room for negotiation.
0% $1,152.24
3% $1,462.98
4% $1,545.89
5% $1,617.15