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engineering economy
Basics Of Engineering Economy 2nd Edition Leland T. Blank, Anthony Tarquin - Solutions
MAG Industrial needs 1000 square meters of storage space. Purchasing land for $80,000 and then erecting a temporary metal building at $70 per square meter is one option. The president hopes to sell the land for $100,000 and the building for$20,000 after 3 years. Another option is to lease space for
Emerson Electric is considering the purchase of equipment that will allow the company to manufacture a new line of wireless devices for home appliance control. The first cost will be $80,000, and the life is estimated at 6 years with a salvage value of $10,000. Three different salespeople have
The equivalent annual worth of the process currently used in manufacturing motion controllers is AW $62,000 per year. A replacement process is under consideration that will have a first cost of$64,000 and an operating cost of $38,000 per year for the next 3 years. Three different engineers have
Amphenol manufactures motor power connectors and is considering upgrading the production equipment to reduce costs over a 6-year planning horizon. The company can invest $80,000 now(year 0), 1 year from now, or 2 years from now.Depending on when the investment is made, the savings will vary. The
Home Automation is considering an investment of$500,000 in a new product line. The company will make the investment only if it will result in a rate of return of 15% per year or higher. If the revenue is expected to be between $138,000 and $165,000 per year for 5 years, use a present worth analysis
A company that manufactures clear PVC pipe is investigating two production options with the following cash flow estimates.Batch Continuous First cost, $ 80,000 130,000 Annual cost, $/year 55,000 30,000 Salvage value, $ 10,000 40,000 Life, years 3 to 10 5 The chief operating officer (COO) has
A company planning to borrow $10.5 million for a plant expansion is not sure what the interest rate will be when it applies for the loan. The rate could be as low as 10% per year or as high as 12% per year. The company will move forward with the project only if the annual worth of the expansion is
Josaline, the owner of a construction company, is planning to purchase specialized equipment to complete a contract awarded to her company. The first cost of the equipment is $250,000 with a life of 3 years at which time she will no longer need the equipment. The operating cost is expected to be
Claris Water Company makes and sells filters for public water drinking fountains. The filter sells for $50 per unit. Recently an inhouse/outsource analysis was completed based on the need for new manufacturing equipment. The equipment first cost of $200,000 and $25,000 annual operation cost
Balboa Industries’ Electronics Division 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.
Donny and Barbara want to join a sports and exercise club. The HiPro plan has no upfront charge and the first month is free. It then charges a total of $100 at the end of each subsequent month.Bally charges a membership fee of $100 per person now and $20 per person per month starting the first
The Ecology Group wishes to purchase a piece of equipment for metal recycling. Machine 1 costs$123,000, has a life of 10 years, an annual cost of $5000, and requires one operator at a cost of $24 per hour. It can process 10 tons per hour. Machine 2 costs $70,000, has a life of 6 years, an annual
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 using (a)
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 could be cooled using a
Process X is estimated to have a fixed cost of$40,000 per year and a variable cost of $60 per unit in year 1, decreasing by $5 per unit per year.Process Y will have a fixed cost of $70,000 per year and a variable cost of $10 per unit, increasing by $1 per unit per year. At an interest rate of
Alfred Home Construction is considering the purchase of five dumpsters and the transport truck to store and transfer construction debris from building sites. The entire rig is estimated to have an initial cost of $125,000, a life of 8 years, a $5000 salvage value, an operating cost of $40 per day,
A plant manager has received two estimates from contractors to improve traffic flow and repave the parking areas. Proposal A includes new curbs, grading, and paving at an initial cost of $250,000.The life of the parking lot surface constructed in this manner is expected to be 4 years with an annual
A Yellow Pages directory company must decide whether it should compose the ads for its clients inhouse or outsource them to a production company.To develop the ads inhouse, the company will have to purchase computers, printers, and other peripherals at a cost of $12,000. The equipment will have a
Three methods can be used for producing heat sensors for high-temperature furnaces. Method A will have a fixed cost of $140,000 per year and a production cost of $62 per part. Method B will have a fixed cost of $210,000 per year and a production cost of $28 per part. Method C will require the
Two membrane systems are under consideration for treating cooling tower blowdown to reduce its volume. A low-pressure seawater reverse osmosis(SWRO) system will operate at 500 psi and produce 720,000 gallons of permeate per day. It will have a fixed cost of $465 per day and an operating cost of
Microsurfacing is part of a pavement restoration and maintenance program that seals the surface of a street that has minor cracking to prevent water from penetrating into the base material. The annual cost of the equipment (truck, tank, valves, etc.) is $109,000 per year and the material cost
The Ascarate Fishing Club, a non-profit 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 land development company is considering the purchase of earth-moving equipment. The equipment will have a first cost of $190,000 and a salvage value of $70,000 when the company sells it in 10 years. A service contract for maintenance on the equipment will cost $40,000 per year. The operating cost
Arural 2-lane road can be surfaced with concrete for$2.3 million per mile. If signing, mowing, and winter maintenance are not included, the basic maintenance costs for concrete and asphalt roadways are$483 and $774 per mile per year, respectively. If concrete lasts 20 years, what is the maximum
Rent-A-Wreck car rental agency has a contract with PM Warranty, Inc. to do major repairs for$700 per car. The car rental agency estimates that it could repair its own cars for $300 each if it acquires a facility for $300,000 now. A salvage value of $40,000 after 15 years is estimated for the
A semiautomatic process has fixed costs of$40,000 per year and variable costs of $30 per unit. An automatic process has fixed costs of$88,000 per year and variable costs of $22 per unit. At what production level per year will the two alternatives break even?
ABB purchased fieldbus communication equipment for a project in South Africa for $3.15 million.If net cash flow is estimated at $500,000 per year, and a salvage value of $400,000 is anticipated, determine how many years the equipment must be used just to break even at interest rates ranging from 8%
The National Potato Cooperative purchased a deskinning 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 annual revenue for years 2 through 8 equal to recover the investment, if costs are constant at $42,000 and a return
Brittany is co-oping 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 easy to estimate due to many
Benjamin used regression analysis to fit quadratic relations to monthly revenue and cost data with the following results:R 0.007Q2 32Q TC 0.004Q2 2.2Q 8a. Plot R and TC. Estimate the quantity Q at which the maximum profit should occur. Estimate the profit at this quantity.b. The profit
A call center in India used by U.S. and U.K. credit card holders has a capacity of 1,500,000 calls annually.The fixed cost of the center is $850,000 with an average variable cost of $1.95 and revenue of $3.25 per call. Find the percentage of the capacity that must be placed each year to break even.
How long will it take to recover an investment of$245,000 in enhanced CNC controls that include axis control to 8 axes (on the milling model) if the associated income is $92,000 per year, expenses are $38,000 per year, and the salvage value is assumed to be 15% of the first cost? Use a MARR of 15%
A small consulting engineering company bought an office building for $900,000. The company has ten engineers and eight support staff. Monthly expenses for salaries, utilities, grounds maintenance, etc. are $1.1 million. If the average billing rate per engineer is $90 per hour, how many hours per
An independent over-the-road (OTR) truck driverowner paid $98,000 for a used tractor-trailer. The salvage value of the rig after five more years of use is expected to be $66,000. The operating cost is$0.60 per mile and the base mileage rate (revenue)is $0.71 per mile.a. How many miles per year must
A professional photographer who specializes in wedding-related activities paid $16,000 for equipment that has a $2000 estimated salvage value after five years. He estimates that his costs associated with each event amount to $65 per day. If he charges $300 per day for his services, how many days
The fixed costs at Harley Motors are $1 million annually. The main product has revenue of $9.90 per unit and $4.50 variable cost. Determine the following:a. Breakeven quantity per yearb. Annual profit if 150,000 units are soldc. Annual profit if 480,000 units are sold
If the first cost of a permanent national monument is $2 million with annual benefits and disbenefits estimated to be $360,000 and $42,000, respectively, the B/C ratio at 6% per year is closest to:a. 0.16b. 0.88c. 1.73d. 2.65
If benefits are $10,000 per year forever, starting in year 1, and costs are $50,000 at time zero and$50,000 at the end of year 2, the B/C ratio at i =10% per year is closest to:a. 1.1b. 1.8c. 0.90d. less than 0.75
If the flood damage estimates for both alternatives were reduced to zero and replaced with benefits of$310,000 per year and $470,000 per year for the two alternatives, respectively, the B/C ratio for the Valley alternative is closest to:a. 0.93b. 1.02c. 1.23d. 1.56
The conventional ΔB/C ratio between alternatives Mountain and Valley is closest to:a. 0.33b. 0.40c. 0.53d. 0.73
In conducting an incremental B/C analysis of this data:a. the DN alternative is not an optionb. the DN alternative is an optionc. there is not enough information given to know if DN is an option or notd. DN is an option only if the alternatives are mutually exclusive
The four mutually exclusive alternatives shown on the next page are compared using the B/C method.The alternative to select is:a. Jb. Kc. Ld. M
If the two independent projects shown are evaluated using an interest rate of 10% per year and the B/C ratio method, the decision is to:a. select do-nothingb. select Xc. select Yd. select X and Y Project X Project Y Annualized first cost, $/year 60,000 90,000 Annual M&O cost, $/year 45,000 35,000
A permanent flood control dam is expected to have an initial cost of $2.8 million and an annual upkeep cost of $20,000. In addition, minor reconstruction will be required every 5 years at a cost of$200,000. As a result of the dam, flood damage will be reduced by an average of $180,000 per year.
The first cost of grading and spreading gravel on a short rural road is expected to be $700,000. The road will have to be maintained at a cost of $25,000 per year. Even though the new road is not very smooth, it allows access to an area that previously could be reached only with off-road vehicles.
From the PW, AW, and FW values below, the conventional B/C ratio is closest to:a. 1.27b. 1.33c. 1.54d. 2.76 PW, $ AW, $/year FW, $First cost 100,000 16,275 259,370 M&O cost 68,798 11,197 178,441 Benefits 245,784 40,000 637,496 Disbenefits 30,723 5,000 79,687
and 1.5c. the B/C ratio on the increment between them is less than 1.5d. the higher-cost alternative is definitely the better one
for the lower and higher-cost ones, respectively,a. the B/C ratio on the increment between them is equal to 1.5b. the B/C ratio on the increment between them is between
In a modified B/C ratio:a. disbenefits and M&O costs are subtracted from benefitsb. disbenefits are subtracted from benefits, and M&O costs are added to costsc. disbenefits and M&O costs are added to costsd. disbenefits are added to costs, and M&O costs are subtracted from benefits 7.39. If two
All of the following cash flows should be identified as benefits, except:a. longer tire life because of smooth pavementb. $200,000 annual income to local businesses because of tourism created by a water reservoirc. expenditure of $20 million for construction of a highwayd. fewer highway accidents
All of the following are primarily associated with public sector projects, except:a. profitsb. taxesc. disbenefitsd. infinite life
The 4 mutually exclusive alternatives shown below are compared by the incremental B/C method.What alternative, if any, should be selected?
L to G 1.02 K to H 1.00
K to L 0.40 J to G
L to J 1.00 I to J
K to J 0.82 J to H
L to H 1.36 I to G
1.06 Comparison ¢B/C Comparison ¢B/C H to G
1.11
0.89
From the data below for projects regarding campgrounds and lodging at a national park, determine which one, if any, should be selected from the 6 mutually exclusive projects. If the proper comparisons have not been made, state which one(s)should be performed.Project Identification G H I J K L Cost,
A consulting engineer is currently evaluating 4 projects for the U.S. government. The present worth values of the costs, benefits, disbenefits, and savings are shown. Assuming the discount rate is 10% per year compounded continuously, determine which projects, if any, should be selected if they
The public utility in a medium-sized city is considering two cash rebate programs to improve water conservation. Program 1, expected to cost an average of $60 per household, offers a rebate of 75% of the purchase and installation costs of an ultra low-flush toilet ($100 maximum). This program is
There are two methods under consideration for improving security at a county jail. Select one based on a B/C analysis at an interest rate of 7%per year and a 10-year study period.Extra New Cameras (EC) Sensors (NS)First cost, $ 38,000 87,000 Annual M&O, $ per year 49,000 74,000 Benefits, $ per year
Two relatively inexpensive alternatives are available to reduce potential earthquake damage at a top secret government research site. The cash flow estimates for each alternative are shown. At an interest rate of 8% per year and a 20-year study period, apply the B/C ratio method to select an
Two alternatives are under consideration for providing energy at a remote research station, one of which must be selected: goethermal and solar. The benefits and costs associated with each alternative are shown. Use the B/C method to determine which should be selected at an interest rate of 6%per
Two sites for suspension bridges are under consideration for crossing the Allegheny River in Pittsburgh, PA. Use the B/C ratio method at a discount rate of 6% per year to determine which bridge, if either, should be built Site N Site S Initial Cost, $ 11 106 27 106 Annual M&O, $/year 100,000 90,000
0.08 —
0.96
—P 52
1.69 —O 44
0.96 N 21
—
Use the B/C method to compare four mutually exclusive alternatives for recycling plastic bottles. Make any additional calculations necessary to determine which alternative should be selected.PW of ΔB/C when Compared Total Costs, Overall with Alternative Alternative $ Millions B/C Ratio M N O P M 10
The present worth of cash flows associated with developing oceanfront property for commercial use are estimated. Determine which plan, if any, should be selected on the basis of a B/C analysis at 8% per year.Present Worth ($1000)Plan Costs Benefits A 1400 1246 B 2220 2560 C 4680 4710
8.3
12.0
4.4 Benefits,$/year
5.3
In order to safeguard the public health, environment, public beaches, water quality, and economy of south San Diego County, California, and Tijuana, Mexico, federal agencies in the United States and Mexico developed four alternatives for treating wastewater prior to discharge into the ocean. The
A project to control flooding from rare, but sometimes heavy, rainfalls in the arid southwest will have the following cash flow estimates. Determine which project should be selected on the basis of a B/C analysis using an interest rate of 8% per year and a 20-year study period.Sanitary Open Sewers
A state agency is considering two mutually exclusive alternatives for upgrading the skills of its technical staff. Alternative 1 involves purchasing software that will reduce the time required to collect background information on each client. The total cost for the purchase, installation, and
When red light cameras are installed at high-risk intersections, rear-end collisions go up, but all other types of accidents go down, including those involving pedestrians. Analysis of traffic accidents in a northwestern city revealed that the total number of collisions at photo-controlled
From the following data, calculate the (a) conventional and (b) modified benefit/cost ratios using a discount rate of 6% per year and a very long (infinite)project life.To the People To the Government Benefits: $300,000 now Costs: $1.5 million now and $100,000 and $200,000 three per year thereafter
The Parks and Recreation Department of Burkett County estimates that the initial cost of a “barebones”permanent river park will be $2.3 million.Annual upkeep costs are estimated at $120,000.Benefits of $340,000 per year and disbenefits of$40,000 per year have also been identified. Using a
The cash flows associated with a Death Valley County arroyo improvement project are as follows:initial cost $650,000; life 20 years; annual maintenance cost $150,000 per year; benefits$600,000 per year; disbenefits $190,000 per year.The discount rate is 6% per year. Determine if the project is
was reported to the County Commissioners for a proposed mosquito control program.The person who prepared the report stated that the health benefits were estimated to be $400,000 per year, and that disbenefits of $25,000 per year were used in the calculation. She also stated that the costs for
The conventional B/C ratio estimate of
The modified B/C ratio for a city-owned hospital heliport project is 1.7. The initial cost is $1 million, annual benefits are $150,000, and the estimated life is 30 years. What is the amount of the annual M&O costs used in the calculation at a discount rate of 6% per year?
The conventional B/C ratio for a flood control project along the Mississippi River was calculated to be 1.3. The benefits were $500,000 per year and the maintenance costs were $200,000 per year.What was the initial cost of the project if a discount rate of 7% per year was used and the project was
As part of the rehabilitation of the downtown area of a northwestern Florida city, the Parks and Recreation Department is planning to develop the space below several overpass bridges into basketball, handball, miniature golf, and tennis courts.The initial cost is expected to be $150,000 for
Determine the B/C ratio for a project that has an infinite life and the following estimates. Use an interest rate of 8% per year.To the people To the government Annual benefits First cost $180,000/year $950,000 Annual disbenefits Annual cost $30,000/year $60,000/year Annual savings
The cash flows associated with a public works project in Buffalo, NY, are shown. Calculate the modified B/C ratio at a discount rate of 5% per year.First cost, $ 35,000,000 AW of benefits, $/year 6,500,000 AW of disbenefits, $/year 1,700,000 M&O costs, $/year 900,000 Life of project, years 30
The sheriff of Los Lunas county along the Arizona-Mexico border asked the county to build a new minimum security detention facility for persons caught while attempting to enter the United States illegally. The construction cost will be $22 million, with annual operating costs of $2.1 million. The
An Army Corps of Engineers project for improving navigation on the Ohio River will have an initial cost of $6,500,000 and annual maintenance of$130,000. Benefits for barges and paddle wheel touring boats are estimated at $820,000 per year. If the project is assumed to be permanent, use the
The following estimates (in $1000 units) have been developed for a new security system at Chicago’s O’Hare Airport.First cost, $ 13,000 AW of benefits, $/year 3,800 FW (in year 20) of disbenefits, $ 6,750 M&O costs, $/year 400 Life of project, years 20a. Calculate the conventional B/C ratio at
A southwestern city that has 170,000 households is required to install treatment systems for the removal of arsenic from drinking water. The annual cost is projected to be $50 per household per year. Assume that one life will be saved every three years as a result of the arsenic removal system and
The Hawaii Department of Transportation has planned a bypass loop that is expected to cost$9,000,000 and save motorists $820,000 per year in gasoline and other automobile-related expenses.However, local businesses will suffer sales losses estimated at $135,000 each year. (a) Calculate the
Calculate the conventional B/C ratio for a county government project that is projected to have the following cash flows: costs of $2,000,000 per year; benefits of $2,740,000 per year; disbenefits of $380,000 per year.
Identify the following as primarily private or public sector characteristics:a. Large investmentb. No profitsc. Funding from feesd. MARR-based selection criteriae. Low interest ratef. Short project life estimate g. Disbenefits Single Project B/C
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