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Engineering economy 7th Edition Leland Blank, Anthony Tarquin - Solutions

The equivalent annual worth of an existing machine at American Semiconductor is estimated to be $-70,000 per year over its remaining useful life of 3 years. It can be replaced now or later with a machine that will have an AW of $-90,000 per year if it is kept for 2 years or less, -$65,000 if it is
An engineer with Haliburton calculated the AW values shown for a presently owned machine by using estimates he obtained from the vendor and company records.Retention Period Years AW Value,$ per Year1..........
The annual worth values for a defender, which can be replaced with a similar used asset, and a challenger are estimated. The defender should be replaced:(a) Now(b) 1 year from now(c) 2 years from now(d) 3 years fromnow
In the opportunity cost approach to replacement analysis, what does the opportunity refer to?
Multiple Choice Questions1. In conducting a replacement study, all of the following are correct viewpoints for the analyst except:(a) Consultant€™s(b) Owner€™s(c) Outsider€™s(d) Nonowner€™s2. A sunk cost is the difference between:(a) The first cost and the
New pumper system equipment is under consideration by a Gulf Coast chemical processing plant. One crucial pump moves highly corrosive liquids from specially lined tanks on intercoastal barges into storage and preliminary refining facilities dockside. Because of the variable quality of the raw
Define the following terms: bundle, contingent project, dependent project.
State two assumptions made when doing capital rationing using a PW analysis for unequal-life projects.
For independent projects identified as W, X, Y, and Z, develop all of the mutually exclusive bundles. Projects X and Y perform the same function with different processes; both should not be selected.
Five projects have been identified for possible implementation by a company that makes dry ice blasters-machines that propel tiny dry ice pellets at supersonic speeds so they fl ash-freeze and then lift grime, paint, rust, mold, asphalt, and other contaminants off in-place machines and a wide range
Four independent projects (1, 2, 3, and 4) are proposed for investment by Perfect Manufacturing, Inc. List all the acceptable mutually exclusive bundles based on the following selection restrictions developed by the department of engineering production:Project 2 can be selected only if project 3 is
Develop all acceptable mutually exclusive bundles for the four independent projects described below if the investment limit is $400 and the following project selection restriction applies: Project 1 can be selected only if both projects 3 and 4 are selected. Project Investment, $1
The general manager for Woodslome Appliance Company Plant #A14 in Mexico City has four independent projects that she can fund this year to improve surface durability on stainless steel products. The project costs and 18% per year PW values are as shown. What projects should be accepted if the
The capital fund for research project investment at SummaCorp is limited to $100,000 for next year. Select any or all of the following proposals if a MARR of 15% per year is established by the board of directors.
An electrical engineer at GE is assigned the responsibility to determine how to invest up to $100,000 in none, some, or all of the following independent proposals. Use(a) Hand(b) Spreadsheet-basedPW analysis and a 15% per year return requirement to help this engineer make the best decision from a
Dwayne has four independent vendor proposals to contract the nationwide oil recycling services for Ford Corporation manufacturing plants. All combinations are acceptable, except that vendors B and C cannot both be chosen. Revenue sharing of recycled oil sales with Ford is a part of the requirement.
Use the PW method at 8% per year to select up to three projects from the four available ones if no more than $20,000 can be invested. Estimated lives and annual net cash flowsvary.
Charlie€™s Garage has $70,000 to spend on new equipment that may increase revenue for his car repair shop. Use the PW method to determine which of these independent investments are financially acceptable at 6% per year, compounded monthly. All are expected to last 3years.
(a) Determine which of the following independent projects should be selected for investment if $315,000 is available and the MARR is 10% per year. Use the PW method to evaluate mutually exclusive bundles to make the selection. (Solve by hand or spreadsheet as instructed.)(b) If the five projects
Use the following analysis of five independent projects to select the best, if the capital limitation is(a) $30,000(b) $52,000(c)Unlimited.
The independent project estimates below have been developed by the engineering and finance managers. The corporate MARR is 8% per year, and the capital investment limit is $4 million. Select the economically best projects using the PW method and(a) Hand solution(b) Spreadsheetsolution.
Use the PW method to evaluate four independent projects. Select as many as three of the four projects. The MARR is 12% per year, and up to $16,000 in capital investment funds areavailable.
Work Problem using a spreadsheet. Use the PW method to evaluate four independent projects. Select as many as three of the four projects. The MARR is 12% per year, and up to $16,000 in capital investment funds areavailable.
A capital rationing problem is defined for you as follows: Three projects are to be evaluated at a MARR of 12.5% per year. No more than $3.0 million can be invested.(a) Use a spreadsheet to select from the independent projects.(b) If the life of project 3 can be increased from 5 to 10 years for
Formulate the linear programming model, develop a spreadsheet, and solve the capital rationing problem in Example(a) As presented(b) Using an investment limit of $13 million.
Use linear programming and a spreadsheet-based solution technique to select from the independent unequal-life projects in. The independent project estimates below have been developed by the engineering and finance managers. The corporate MARR is 8% per year, and the capital investment limit is $4
Solve the capital budgeting problem in Problem (a), using the linear programming model and a spreadsheet. (a) Use a spreadsheet to select from the independentprojects.
Johnson and Johnson is expanding its first-aid products line for individuals allergic to latex. The research team comprised of doctors, engineers, and chemists has proposed the four projects estimated in Problem. Develop the linear programming model and use a spreadsheet to select the projects to
Using the estimates in Problem and repeated spreadsheet solution of the capital budgeting problem for budget limits ranging from b = $5000 to b = $25,000, develop a spreadsheet chart that plots b versus the value of Z. Use the PW method to evaluate four independent projects. Select as many as
A newly proposed project has a first cost of $325,000 and estimated annual income of $60,000 per year for 8 years.(a) Determine the IROR, PI, and PW values if the MARR is 15% per year.(b) Is the project economically justified?
An engineer at Delphi Systems is considering the projects below, all of which can be considered to last indefinitely. The company's MARR is 13% per year.(a) Determine which projects should be selected on the basis of IROR if the budget limitation is $39,000.(b) What is the overall rate of return if
The five independent projects shown below are under consideration for implementation by KNF Neuberger, Inc. The company's MARR is 15% per year.(a) Determine which projects should be undertaken on the basis of IROR if the budget limitation is $97,000. (Solve by hand or spreadsheet as instructed.)(b)
An estimated 6 billion gallons of clean drinking water disappear each day across the United States due to aging, leaky pipes and water mains before it gets to the consumer or industrial user. The American Society of Civil Engineers (ASCE) has teamed with municipalities, counties, and several
Determine the profitability index at 10% per year interest for a project that has a first cost of $200,000 in year 0 and $200,000 in year 2, an annual operating cost of $80,000 per year, revenue of $170,000 per year, and a salvage value of $60,000 after its 5-year life.
The budget limit is $120,000, and the interest rate is 10% per year. All projects have a 10-year life. Use(a) The PI method(b) The IROR method to rank and select from the independent projects.(c) Are different projects selected using the twomethods?
The six independent projects shown below are under consideration by Peyton Packing under budget-constrained conditions. The company always has more projects to engage in than it has capital to fund projects. Therefore, it uses a relatively high MARR of 25% per year. Since all projects are
For a capital limit of $25,000, the selected independent projects are:(a) P only(b) Q only(c) R only(d) P andR
For a project that requires an initial investment of $26,000 and yields $10,000 per year for 4 years, the PI at an interest rate of 10% per year is closest to:(a) 1.03(b) 1.22(c) 1.38(d) 1.56
Multiple Choice Questions1. A project that has a condition associated with its acceptance or rejection is known as:(a) A mutually exclusive alternative(b) A contingent project(c) A dependent project(d) Both (b) and (c)2. An assumption inherent in capital budgeting is that all positive net cash
Victoria is comparing two mutually exclusive alternatives, A and B. The overall ROR on alternative A is greater than the MARR, and the overall ROR on alternative B, which requires the larger investment, is exactly equal to the MARR. (a) What is known about the ROR on the increment between A and B?
A design-to-cost approach to product pricing involves determining the selling price of the product and then figuring out if it can be made at a cost lower than that. Banner Engineering's QT50R radar-based sensor features frequency-modulated technology to accurately monitor or detect objects up to
Handheld fiber-optic meters with white light polarization interferometry are useful for measuring temperature, pressure, and strain in electrically noisy environments. The fixed costs associated with manufacturing are $800,000 per year. If a base unit sells for $2950 and its variable cost
A metallurgical engineer has estimated that the capital investment cost for recovering valuable metals (nickel, silver, platinum, gold, etc.) from the copper refinery's wastewater stream will be $12 million. The equipment will have a useful life of 15 years with no salvage value. Its operating cost
Determine the breakeven point for each plant.Hambry Enterprises produces a component for recycling uranium used as a nuclear fuel in power plant generators in France and the United States. Use the following cost and revenue figures, quoted in U.S. dollars per hundredweight (cwt), recorded for this
Estimate the minimum revenue per hundredweight required for next year if breakeven values and variable costs remain constant, but fixed costs increase by 10%.Hambry Enterprises produces a component for recycling uranium used as a nuclear fuel in power plant generators in France and the United
During this year, the French plant sold 950 units in Europe, and the U.S. plant sold 850 units. Determine the year's profit (loss) for each plant.Hambry Enterprises produces a component for recycling uranium used as a nuclear fuel in power plant generators in France and the United States. Use the
Hambry's president has a goal of $1 million profit next year at each plant with no revenue or fixed cost increases. Determine the decreases in dollar amounts and percentages in variable cost necessary to meet this goal, if the number of units sold is the same as this year.Hambry Enterprises
The National Highway Traffic Safety Administration raised the average fuel efficiency standard to 35.5 miles per gallon (mpg) for cars and light trucks by the year 2016. The rules will cost consumers an average of $926 extra per vehicle in the 2016 model year. Assume a person purchases a new car in
A call center in India used by U.S. and U.K. credit card holders has a capacity of 1,400,000 calls annually. The fixed cost of the center is $775,000 with an average variable cost of $1 and revenue of $2.50 per call.(a) Find the percentage of the call capacity that must be placed each year to break
The addition of a turbocharger to a small V-6 engine that gets 18 miles per gallon of gasoline can boost its power to that of a V-8 engine and increase fuel efficiency at the same time. If Bill will pay $800 to turbocharge his engine and his fuel efficiency increases by 3 miles per gallon, how many
Transporting extremely heavy patients (people who weigh more than 500 pounds) is much more difficult than transporting normal-weight patients. Various cities in Colorado, Nebraska, and Kansas charge $1421 for an extremely obese patient compared to $758 for a typical patient. The extra fees are
High-profile vehicles have poor fuel efficiency because of increased wind resistance from their large front area. A number of companies make devices that they claim will significantly increase a vehicle's fuel efficiency. One company claims that by spending $560 on its friction-reducing device, the
As the price of gasoline goes up, people are willing to drive farther to fill their tank in order to save money. Assume you had been buying gasoline for $2.90 per gallon and that it went up to $2.98 per gallon at the station where you usually go. If you drive an F-150 pickup that gets 18 miles per
An automobile company is investigating the advisability of converting a plant that manufactures economy cars into one that will make retro sports cars. The initial cost for equipment conversion will be $200 million with a 20% salvage value anytime within a 5-year period. The cost of producing a car
For the last 2 years, The Health Company has experienced a fixed cost of $850,000 per year and an (r – v) value of $1.25 per unit for its multivitamin line of products. International competition has become severe enough that some financial changes must be made to keep market share at the current
Expand the analysis performed in Problem by changing the variable cost per unit. The financial manager estimates that fixed costs will fall to $750,000 when the required production rate to break even is at or below 600,000 units. What happens to the breakeven points over the (r – v) range of 1%
Providing restrooms at parks, zoos, and other city-owned recreation facilities is a considerable expense for municipal governments. City councils usually opt for permanent restrooms in larger parks and portable restrooms in smaller ones. The cost of renting and servicing a portable restroom is
A consulting engineer is considering two methods for lining ponds used for evaporating concentrate generated during reverse osmosis treatment of brackish groundwater for the Clay County Industrial Park. A geosynthetic bentonite clay liner (GCL) will cost $1.8 million to install, and if it is
An irrigation canal contractor wants to determine whether he should purchase a used Caterpillar mini excavator or a Toro powered rotary tiller for servicing irrigation ditches in an agricultural area of California. The initial cost of the excavator is $26,500 with a $9000 salvage value after 10
An effective method to recover water used for regeneration of ion exchange resins is to use a reverse osmosis system in a batch treatment mode. Such a system involves recirculation of the partially treated water back into the feed tank, causing the water to heat up. The water can be cooled using
Samsung Electronics is trying to reduce supply chain risk by making more responsible make-buy decisions through improved cost estimation. A high-use component (expected usage is 5000 units per year) can be purchased for $25 per unit with delivery promised within a week. Alternatively, Samsung can
A partner in a medium-size A/E (architectural/engineering) design firm is evaluating two alternatives for improving the exterior appearance of the building they occupy. The building can be completely painted at a cost of $6500. The paint is expected to remain attractive for 4 years, at which time
A junior mechanical engineering student is cooping this semester at Regency Aircraft, which customizes the interiors of private and corporate jets. Her first assignment is to develop the specifications for a new machine to cut, shape, and sew leather or vinyl covers and trims. The first cost is not
Ascarate Fishing Club (a nonprofit organization dedicated to teaching kids how to fish) is considering two options for providing a heavily stocked pond for kids who have never caught a fish before.Option 1 is an above-ground swimming pool made of heavy vinyl plastic that will be assembled and
A rural subdivision has several miles of access roads that need a new surface treatment. Alternative 1 is a gravel base and pavement with an initial cost of $500,000 that will last for 15 years and has an annual upkeep cost of $100 per mile. Alternative 2 is to enhance the gravel base now at a cost
A waste-holding lagoon situated near the main plant receives sludge daily. When the lagoon is full, it is necessary to remove the sludge to a site located 8.2 kilometers from the main plant. Currently, when the lagoon is full, the sludge is removed by pump into a tank truck and hauled away. This
Lorraine can select from two nutrient injection systems for her cottage industry of hydroponic tomato and lettuce greenhouses.(a) Use an AW relation to determine the minimum number of hours per year to operate the pumps that will justify the Auto Green system, if the MARR is 10% per year.(b) Which
An engineering practitioner can lease a fully equipped computer and color printer system for $800 per month or purchase one for $8500 now and pay a $75 per month maintenance fee. If the nominal interest rate is 15% per year, determine the months of use necessary for the two to break even. Show
The office manager of an environmental engineering consulting firm was instructed to make an eco-friendly decision in acquiring an automobile for general office use. He is considering a gasoline-electric hybrid or a gasoline-free, all-electric hatchback. The hybrid under consideration is GM's Volt,
How long will you have to sell a product that has an income of $5000 per month and expenses of $1500 per month if your initial investment is?$28,000 and your MARR is(a) 0%(b) 3% per month? Solve by formula.(c) Write the spreadsheet functions to display the payback period for both 0% and 3% per
(a) Determine the payback period at an interest rate of 8% per year for an asset that initially cost $28,000, has a scrap value of $1500 whenever it is sold, and generates cash flow of $2900 per year.(b) If the asset will be in service for 12 years, should it be purchased?
ABB purchased fieldbus communication equipment for a project in South Africa for $3.15 million. The net cash flow is estimated at $500,000 per year, and a salvage value of $400,000 is anticipated regardless of when it is sold. Determine the number of years the equipment must be used to obtain
Sundance Detective Agency purchased new surveillance equipment with the following estimates. The year index is k = 1, 2, 3, . . . .First cost ....................................$1050Annual maintenance cost ........$70 + 5 k per yearExtra annual revenue................$200 + 50 k per yearSalvage
Clarisa, an engineering manager, wants to purchase a resort accommodation to rent to skiers. She is considering the purchase of a three- bedroom lodge in upper Montana that will cost $250,000. The property in the area is rapidly appreciating in value because people anxious to get away from urban
Laura's grandparents helped her purchase a small self-serve laundry business to make extra money during her 5 college years. When she completed her engineering management degree, she sold the business and her grandparents told her to keep the money as a graduation present. For the net cash flows
Buhler Tractor sold a tractor for $45,000 to Tom Edwards 10 years ago.(a) What is the uniform net cash flow that Tom must make each year to realize payback and a return of 5% per year on his investment over a period of 3 years? 5 years? 8 years? All 10 years?(b) If the net cash flow was actually
National Parcel Service has historically owned and maintained its own delivery trucks. Leasing is an option being seriously considered because costs for maintenance, fuel, insurance, and some liability issues will be transferred to Pacific Leasing, the truck leasing company. The study period is no
Julian Browne, owner of Clear Interior Environments, purchased an air scrubber, HEPA vacuum, and other equipment for mold removal for $15,000 eight months ago. Net cash flows were $−2000 for each of the first 2 months, followed by $1000 per month for months 3 and 4. For the last 4 months, a
Explain why payback analysis may favor an alternative with a shorter payback period when it is not the better choice economically.
When comparing two alternatives, why is it best to use no-return payback analysis as a preliminary screening tool prior to conducting a complete PW or AW evaluation?
Benjamin used regression analysis to fit quadratic relations to monthly revenue and cost data with the following results:R = – 0.007 Q2 + 32 QTC = 0.004 Q2 + 2.2 Q + 8(a) Plot R and TC. Estimate the quantity Qp at which the maximum profit should occur.Estimate the amount of profit at this
The National Potato Cooperative purchased a de-skinning machine last year for $150,000. Revenue for the first year was $50,000. Over the total estimated life of 8 years, what must the remaining equivalent annual revenues (years 2 through 8) equal to break even by recovering the investment and a
Determine the annual breakeven quantity for (a) The current system (b) The new system.Wilson Partners manufactures thermocouples for electronics applications. The current system has a fixed cost of $300,000 per year and a variable cost of $10 per unit. Wilson sells the units for $14 each. A newly
Plot the two profit relations and estimate graphically the breakeven quantity between the two alternatives.Wilson Partners manufactures thermocouples for electronics applications. The current system has a fixed cost of $300,000 per year and a variable cost of $10 per unit. Wilson sells the units
Determine the breakeven number of tests between the two options. Mid-Valley Industrial Extension Service, a state- sponsored agency, provides water quality sampling services to all business and industrial firms in a 10-county region. Just last month, the service purchased all necessary lab
Use a spreadsheet to graph the AW curves for both options for test loads between 0 and 4000 per year in increments of 1000 tests. What is the estimated breakeven quantity?Mid-Valley Industrial Extension Service, a state- sponsored agency, provides water quality sampling services to all business and
The service director has asked the outsource company to reduce the per sample costs by 25% across the board over the 8-year study period. What will this do to the breakeven point?Mid-Valley Industrial Extension Service, a state- sponsored agency, provides water quality sampling services to all
Assume the Extension Service can reduce its annual salaries from $175,000 to $100,000 per year and the per sample cost from $25 to $20. What will this do to the breakeven point? What is the new annual breakeven test quantity?Mid-Valley Industrial Extension Service, a state- sponsored agency,
AW 1 = – 23,000(A/P, 10%, 10) + 4000(A/F, 10%, 10) – 3000 – 3xAW2 = –8,000(A/P, 10%, 4) – 2000 − 6xFor these two AW relations, the breakeven point x , in miles per year, is closest to:(a) 1130(b) 1224(c) 1590(d) 655
To make an item in-house, equipment costing $250,000 must be purchased. It will have a life of 4 years, an annual cost of $80,000, and each unit will cost $40 to manufacture. Buying the item externally will cost $100 per unit. At i = 15% per year, it is cheaper to make the item in-house if the
A procedure at Mercy Hospital has fixed costs of $10,000 per year and variable costs of $50 per test. If the procedure is automated, its fixed cost will be $21,500 per year, but its variable cost will be only $10 per test. The number of tests that must be performed each year for the two operations
Two different methods are under consideration for building a bypass road. Material C will cost $100,000 per mile and last for 10 years. Its annual maintenance cost will be $10,000 per year per mile. Material D will cost $30,000 per mile and last for 5 years. At an interest rate of 6% per year, the
A construction company can purchase a piece of equipment for $50,000 and spend $100 per day in operating costs. The equipment will have a 5-year life with no salvage value. Alternatively, the company can lease the equipment for $400 per day. The number of days per year the company must require the
An anticorrosive coating for a chemical storage tank will cost $5000 and last 5 years if touched up at the end of 3 years at a cost of $1000. If an oil-base enamel coating could be used that will last 2 years, the amount the enamel coating can cost for the two to breakeven at i = 8% per year is
The price of a car is $50,000 today. Its price is expected to increase by $2400 each year. You now have $25,000 in an investment that is earning 20% per year. The number of years before you have enough money to buy the car, without borrowing any money, is closest to:(a) 3 years (b) 5 years(c) 7
Process A has a fixed cost of $16,000 per year and a variable cost of $40 per unit. For process B, 5 units can be produced in 1 day at a cost of $125. If the company’s MARR is 10% per year, the fixed cost of process B that will make the two alternatives have the same annual cost at a production
The profit relation for the following estimates at a quantity that is 20% above breakeven is:Fixed cost = $500,000 per yearVariable cost per unit = $200Revenue per unit = $250(a) Profit = 200(12,000) – 250(12,000) – 500,000(b) Profit =250(12,000) – 500,000 – 200 (12,000)(c) Profit
Two methods of weed control in an irrigation canal are under consideration. Method A involves lining at a cost of $4000. The lining will last 20 years. The maintenance cost with this method will be $3 per mile per year. Method B involves spraying a chemical that costs $40 per gallon. One gallon
How long will you have to maintain a business that has an income of $5000 per year and expenses of $1500 per year if your initial investment was $28,000 and your MARR is 10% per year?(a) Less than 6 years(b) 8 years(c) 12 years(d) 17 years
Multiple Choice Questions1. In linear breakeven analysis, if a company expects to operate at a point above the breakeven point, it should select the alternative:(a) With the lower fixed cost(b) With the higher fixed cost(c) With the lower variable cost(d) With the higher variable cost2. A company

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