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engineering economy
Engineering Economy 8th edition Leland T. Blank, Anthony Tarquin - Solutions
You have been requested to compare four mutually exclusive alternatives using the B/C method and the results shown. Which alternative, if any, do you recommend? AB/C Ratlo When Compared Equivalent Total Cost, Direct $ Million B/C Ratio X with Alternative Alternatlve х 20 0.75 1.07 30 1.70 50 1.20
From the information shown for possible location of campgrounds and lodging at a national park, determine which project, if any, should be selected from the six mutually exclusive projects. Selected incremental B/C ratios are included. If the proper comparisons have not been made, state which
The city of Valley View, California, is considering various proposals regarding the disposal of used tires. All proposals involve shredding, but the benefits differ in each plan. An incremental B/C analysis was initiated, but the engineer conducting the study left recently. Using a 20-year study
Four mutually exclusive, direct benefit alternatives are compared using the B/C method. Which alternative, if any, should be selected? AB/C Ratio When Compared with Initial Alternative Investment, B/C $ illion к L Alternative Ratio M J 20 1.10 K 25 0.96 0.40 33 1.22 1.42 2.14 M 45 0.89 0.72 0.80
The Department of Defense is considering three sites in the National Wildlife Preserve for extraction of rare metals. The cash flows associated with each site are summarized. The extraction period is limited to 5 years and the interest rate is 10% per year. Use the B/C method to determine which
Three alternatives identified as X, Y, and Z were evaluated by the B/C method. The analyst calculated project B/C values of 0.92, 1.34, and 1.29. The alternatives are listed in the order of increasing equivalent total costs. The analyst is not sure whether an incremental analysis is needed.(a) What
A public-private partnership has been formed between a city, county, and construction/management company to attract a professional athletic team to the area. Assume you are the engineer with the company and are assisting with the benefit/cost analysis. The primary options are to construct a domed
A public utility in a medium-size city is considering two cash rebate programs to achieve water conservation. Program 1, which is expected to cost an average of $60 per household, provides a rebate of 75% of the purchase and installation costs of an ultra-low-flush toilet ($100 max). This program
Solar and conventional power alternatives are available to provide energy for monitoring equipment at a remote irrigation canal site. The estimates associated with each alternative have been developed. Use the B/C method to select one at an interest rate of 7% per year over a 5-year study period.
Locations under consideration for a border patrol station have their costs estimated by the federal government. Use the B/C ratio method at an interest rate of 6% per year to determine which location to select, if any. North, N 1.1 x 106 South, S 2.9 x 106 Location Initial cost, $ Annual cost, $
There are two potential locations to construct an urgent care walk-in clinic to serve rural residents. Use B/C analysis to determine which location, if any, is better at an interest rate of 8% per year. (Note: See Problem 9.55 for more on this analysis.)Data from problem 9.55Rank by increasing
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
Two relatively inexpensive alternatives are available for reducing potential earthquake damage at a top secret government research site. The cash flow estimates for each alternative are given below. At an interest rate of 8% per year, use the B/C ratio method to determine which one should be
The city engineer and economic development directors are evaluating two sites for construction of a multipurpose sports arena. The sites are downtown (DT) and southwest (SW) of the metropolitan area. The city already owns enough land at the DT site; however, the land for a parking garage will cost
One of two alternatives will be selected to reduce flood damage in a rural community in central Arizona. The estimates associated with each alternative are available. Use B/C analysis at a discount rate of 8% per year over a 20-year study period to determine which alternative should be selected.
Two alternatives, identified as X and Y, are evaluated using the B/C method. Alternative Y has a higher total cost than X. If the B/C ratios are 1.2 and 1.0 for alternatives X and Y, respectively, which alternative should be selected? Why?
Dickinson, a large oil and gas drilling and operating corporation, has invested over the past 6 years in the installation and operation of a FOUNDATION Fieldbus H1 (FF H1) system developed by Pepperl+Fuchs of Germany. A project engineer has collected information on annual net cash flow increases
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 a group of selected
In United States airspace, the average number of commercial aircraft in the sky on an average morning is 4000. There are another 16,000 planes on the ground. Aerospace company Rockwell-Collins developed what it calls a “digital parachute,” a panic-button technology that will land any plane in a
With an installed capacity in excess of 11,000 MW, the Belo Monte dam complex on the Xingu River in Brazil will be the world’s third largest hydroelectric dam. The project is expected to cost $16 billion and will begin producing electricity upon completion by the end of 2019 after the 5-year
From the following data for a PPP project, calculate the(a) Conventional, and(b) Modified benefit/ cost ratios using an interest rate of 6% per year and an infinite project period. To the People $100,000 per year beginning now To the Government Costs: $1.8 million now and $200,000 every 3 years
Calculate the B/C ratio for the following cash flow estimates at a discount rate of 10% per year. Is the project justified?Item ...............................................EstimatePW of benefits, $ .......................3,800,000AW of disbenefits, $/year .............45,000First cost, $
The B/C ratio for a mosquito control program proposed by the Harris County Department of Health is reported to be 2.1. The person who prepared the report stated that the annual health benefits were estimated to be $400,000, and that disbenefits of $25,000 per year were used in the calculation. He
A consultant, after 3 months of work, reported that the modified B/C ratio for a city-owned hospital heliport project is 1.7. If the initial cost is $1 million and the annual benefits are $150,000, what is the amount of the annual M&O costs used in the calculation? The report stated that a
The following estimates (in $1000 units) have been developed for a security system upgrade at Chicago’s O’Hare Airport.(a) Calculate the conventional B/C ratio at a discount rate of 10% per year. Is the project justified?(b) Determine the minimum first cost that is possible to render 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. The project is assumed to be permanent and the discount
A rural, agriculture-based city that has 17,000 households is required to install treatment systems for the removal of arsenic and other harmful chemicals from its drinking water. The annual cost is projected to be $150 per household per year. Assume that one life will be saved every 3 years as a
The State Highway Department is considering a bypass loop that is expected to save motorists $820,000 per year in gasoline and other automobilerelated expenses. However, local businesses will experience revenue losses estimated to be $135,000 each year. The cost of the loop will be $9,000,000.(a)
The State Legislative Budget Board approved adding 4000 surveillance cameras along the 800-mile Texas-Mexico border from El Paso to Brownsville at a cost of $300 per camera. In addition to the cost of the cameras, manpower and other resources are expected to cost $3.2 million per year. The benefits
The B/C ratio for a flood control project along the Swanee River was calculated to be 1.3. If the benefits were $500,000 per year and the maintenance costs were $200,000 per year, determine the initial cost of the project at an interest rate of 7% per year and a 50-year life.
As part of the rehabilitation of the downtown area of a southern U.S. city, the Parks and Recreation Department expects to develop the space below several overpasses into basketball, handball, miniature golf, and tennis courts. The estimates are: initial cost of $190,000, life of 20 years, and
The National Environmental Protection Agency has established that 2.5% of the median household income is a reasonable amount to pay for safe drinking water. For a median household income of $45,000 per year, what would the health benefits have to be (in dollars per household per year) for the B/C
Officials from the City of Galveston and State of Texas gathered to celebrate the start of a beach restoration project that involves dumping sand and adding antierosion structures. The first cost of the project is $30 million with annual maintenance estimated at $340,000. If the restored/expanded
The estimated annual cash flows for a proposed municipal government project are costs of $750,000 per year, benefits of $900,000 per year, and disbenefits of $225,000 per year. Calculate the conventional B/C ratio at an interest rate of 6% per year and determine if it is economically justified.
Where is the salvage value placed in a conventional B/C ratio? Why? How is it handled mathematically?
List two advantages of a public-private partnership (PPP).
Identify the following as primarily private or public sector characteristics:(a) Large investment(b) No profits(c) Funding from fees(d) MARR-based selection criteria(e) Low interest rate(f) Short project life estimate(g) Disbenefits
Identify the viewpoint (e.g., budget, government unit, citizen, business owner), and categorize the following cash flows as a benefit, disbenefit, or cost:(a) $600,000 annual income to area businesses from tourism created by new freshwater reservoir/ recreation area(b) $450,000 per year for
Explain how the viewpoint established before a public sector analysis is started can turn an estimate from being categorized as a disbenefit to a cost, or vice versa.
Identify the following funding sources as primarily public or private.(a) Municipal bonds(b) Retained earnings(c) Sales taxes(d) Automobile license fees(e) Bank loans(f) Savings accounts(g) An engineer’s IRA (Individual Retirement Account)(h) State fishing license revenues(i) Entrance fees to
Identify the following projects as primarily public or private sector.(a) Bridge across Ohio River(b) Coal mine expansion(c) Baja 1000 race team(d) Consulting engineering firm(e) New county courthouse building(f) Flood control project(g) Endangered species designation(h) Freeway lighting (lumen
In conducting a B/C analysis,(a) Why is it usually necessary to take a specific viewpoint in categorizing cost, benefit, dis-benefit estimates;(b) What are two specific viewpoints that you can identify if the situation is a financial transaction between you and another person? Between your company
Five mutually exclusive cost alternatives that have infinite lives are under consideration for decreasing the fruit-bruising rates of a thin skin-fruit grading and packing operation (peaches, pears, apricots, etc.). The initial costs and cash flows of each alternative are available. If the MARR is
Based on the alternative ROR values (i*), the incremental ROR values (Δi*), and the company€™s MARR of 16% per year, the alternative to select is:(a) A(b) B(c) C(d) DNJewel-Osco evaluated three different pay-by-touch systems that identify a customer by a finger scan and
If the alternatives are mutually exclusive and the MARR is 25% per year, the alternative to select is:(a) B(b) D(c) E(d) None of themQuestion is based on the following five alternatives that are evaluated by the rate of return method. Incremental ROR, %, When Compared with Alternative Initial
If the alternatives are mutually exclusive and the MARR is 15% per year, the alternative to select is:(a) Either B, D, or E(b) Only B(c) Only D(d) Only EQuestion is based on the following five alternatives that are evaluated by the rate of return method. Incremental ROR, %, When Compared with
If the alternatives are independent and the MARR is 15% per year, the one(s) to select is (are):(a) Only D(b) Only D and E(c) Only B, D, and E(d) Only EQuestion is based on the following five alternatives that are evaluated by the rate of return method. Incremental ROR, %, When Compared with
The incremental cash flow between two alternatives is shown below. The equation that can be used to correctly solve for the incremental rate of return is:(a) 0 = −20,000 + 3000(A∕P,Δi*,10) + 400(P∕F,Δi*,10)(b) 0 = −20,000 + 3000(A∕P,Δi*,10) + 400(A∕F,Δi*,10)(c) 0 =
When comparing two mutually exclusive alternatives by the ROR method, if the rate of return on the alternative with the higher first cost is less than that of the lower first-cost alternative:(a) The rate of return on the increment between the two is greater than the rate of return for the lower
A chemical engineer working for a large chemical products company was asked to make a recommendation about which of three mutually exclusive revenue alternatives should be selected for improving the marketability of personal care products used for conditioning hair, cleansing skin, removing
When conducting an ROR analysis of mutually exclusive cost alternatives:(a) All of the projects must be compared against the do-nothing alternative(b) More than one project may be selected(c) An incremental investment analysis is necessary to identify the best one(d) The project with the highest
A company that manufactures high-strength epoxys is considering investing $100,000 in two new adhesives identified as X and Z. The investment in X is $20,000 and is expected to yield a rate of return of 40% per year. Your supervisor asked you to determine what rate of return would be required on
The rate of return for alternative X is 18% per year and for alternative Y is 17%, with Y requiring a larger initial investment. If a company has a minimum attractive rate of return of 16%:(a) The company should select alternative X(b) The company should select alternative Y(c) The company should
Alternative A has a rate of return of 14% and alternative B has a rate of return of 17%. If the investment required in B is larger than that required for A, the rate of return on the increment of investment between A and B is:(a) Larger than 14%(b) Larger than 17%(c) Between 14% and 17%(d) Smaller
Perform the required analysis of truck-bed sizes in Problem 8.33 using a spreadsheet.Data from problem 8.33A recent graduate who wants to start an excavation/ earth-moving business is trying to determine which size of used dump truck to buy. He knows that as the bed size increases, the net income
A mechanical engineer at Anode Metals is considering five equivalent projects, some of which have different life expectations. Salvage value is nil for all alternatives. Assuming that the company€™s MARR is 13% per year, determine which should be selected(a) If they are independent,(b) If
Ryan has received cost and salvage value estimates for two competing fire sprinkler systems to be installed in his office building. System A has a first cost of $100,000, annual M&O costs of $10,000, and a $20,000 salvage value after 5 years. System B has a first cost of $175,000, M&O costs
In Problem 8.20, two methods of cooling water treatment are analyzed. These are revenue alternatives which generate annual savings against their costs.(a) Perform the complete procedure for incremental ROR analysis for revenue alternatives to determine which method to select at MARR = 5% per
Kleen Corp., a privately owned and operated single-stream recycling facility, has annual contracts with several cities in the Tri-County Metropolitan Area. Kleen Corp. wants to add a new set of sensors to its existing machinery that will separate plastics and metals from paper and glass materials
A rate of return analysis was initiated for the infinite- life alternatives shown below.(a) Fill in the 10 blanks in the incremental rate of return (Δi*) columns.(b) How much revenue is associated with each alternative?(c) Which alternative should be selected if they are mutually
Four different machines were under consideration for materials flow improvement on a drug bottling line. An engineer performed the economic analysis to select the best machine, but some of his calculations were removed from the report by a disgruntled employee. All machines are assumed to have a
The four alternatives described below are being evaluated by the rate of return method.(a) If the proposals are independent, which should be selected at a MARR of 16% per year?(b) If the proposals are mutually exclusive, which one should be selected at a MARR of 9% per year?(c) If the proposals are
A small manufacturing company could expand its operation by adding new products. Any or all of the products shown below can be added. If the company uses a MARR of 15% per year and a 5-year project period, which products, if any, should the company introduce? Product 4 3 Initial cost, $ Annual
You are considering five projects, all of which can be considered to last indefinitely. If the company€™s MARR is 15% per year, determine which should be selected if they are(a) Independent projects,(b) Mutually exclusive alternatives. Net Annual Income, $ First Cost, $ Alternative ROR, %
For the four revenue alternatives below, use the ROR method results to determine:(a) Which one(s) to select, if MARR = 17% per year and the proposals are independent.(b) Which one to select, if MARR = 14.5% per year and the alternatives are mutually exclusive.(c) Which one to select, if MARR = 10%
A recent graduate who wants to start an excavation/ earth-moving business is trying to determine which size of used dump truck to buy. He knows that as the bed size increases, the net income increases, but he is uncertain whether the incremental expenditure required for the larger trucks is
Old Southwest Canning Co. has determined that any one of four machines can be used in its chilicanning operation. The cost of the machines are estimated below, and all machines have a 5-year life. If the minimum attractive rate of return is 25% per year, determine which machine should be selected
Polytec Chemical, Inc. must decide between two additives to improve the dry-weather stability of its low-cost acrylic paint. Additive A will have an equipment and installation cost of $125,000 and an annual cost of $55,000. Additive B will have an installation cost of $175,000 and an annual cost of
A total of $50,000 was allocated to a project to detect and reduce insider theft in the ZipCar auto parts store. Two alternatives identified as Y and Z are under consideration. The overall ROR on the $50,000 is expected to be 40%, with the rate of return on the $20,000 increment between Y and Z at
According to Descartes’ rule of signs, the possible number of rate of return values for the net cash flow series ++++−−−−−−+−+−−−++ is(a) 2(b) 4(c) 6(d) 8
A metal plating company is considering four different methods for recovering by-product heavy metals from a manufacturing site€™s liquid waste. The investment costs and annual net incomes associated with each method have been estimated. All methods have an 8-year life; the MARR is 11% per
Four mutually exclusive service alternatives are under consideration for automating a manufacturing operation. The alternatives were ranked in order of increasing initial investment and then compared by incremental rate of return analysis.The rate of return on each increment of investment was less
One of Suzanne€™s project engineers e-mailed her the screen-shot (below) of his spreadsheet analysis of the annual costs and savings for two equivalent systems considered for installation as a major upgrade of the fire and safety systems that reduce the possibility of human injury on the
Two roadway designs are under consideration for access to a permanent suspension bridge. Design 1A will cost $3 million to build and $100,000 per year to maintain. Design 1B will cost $3.5 million to build and $40,000 per year to maintain. Both designs are assumed to be permanent. Use an AWbased
Alternative R has a first cost of $100,000, annual M&O costs of $50,000, and a $20,000 salvage value after 5 years. Alternative S has a first cost of $175,000 and a $40,000 salvage value after 5 years, but its annual M&O costs are not known. Determine the M&O costs for alternative S
Konica Minolta plans to sell a copier that prints documents on both sides simultaneously, cutting in half the time it takes to complete big commercial jobs. The faster copier is expected to increase profit by $2,500,000 per year, regardless of which of the following rollers the company uses in its
A solid-waste recycling plant is considering two types of storage bins using an MARR of 10% per year.(a) Use ROR evaluation to determine which should be selected.(b) Confirm the selection using the regular AW method at MARR = 10% per year. Storage Bin First cost, $ AOC, $ per year Salvage value, $
The manager of a canned-food processing plant has two labeling machine options. On the basis of a rate of return analysis with a MARR of 20% per year, determine(a) Which model is economically better,(b) If the selection changes, provided both options have a 4-year life and all other estimates
A process control manager is considering two robots to improve materials handling capacity in the production of rigid shaft couplings that mate dissimilar drive components. Robot X has a first cost of $84,000, an annual M&O cost of $31,000, a $40,000 salvage value, and will improve revenues by
A company that manufactures amplified pressure transducers wishes to decide between the machines shown€”variable speed (VS) and dual speed (DS). Compare them on the basis of rate of return and determine which should be selected if the MARR = 15% per year. VS DS First cost, $ -225,000
EP Electric has identified two new methods to treat its cooling water. Alternative I (for inflow) would treat the raw water with a conventional reverse osmosis system so that the cycles of concentration could be increased from 5 to 20. This will result in water cost savings of $360,000 per year and
A consulting engineering firm’s CFO wants to purchase either Ford Explorers or Toyota 4Runners for company principals. The two models under consideration cost $30,900 for the Ford and $36,400 for the Toyota. When considering life-cycle costs, the AOC of the Explorer is expected to be $600 per
The PW-based relation for the incremental cash flow series to find Δi* between the lower first-cost alternative X and alternative Y has been developed.0 = − 40,000 + 9000(P∕A,Δi*,10) − 2000(P∕F,Δi*,10)Determine the highest MARR value for which Y is preferred over X. Write the single-cell
Lesco Chemical is considering two processes for making a cationic polymer. Process A has a first cost of $100,000 and an AOC of $60,000 per year. Process B’s first cost is $165,000. If both process will be adequate for 4 years and the rate of return on the increment between the alternatives is
Certain parts for NASA€™s reusable space exploration vehicle can either be anodized (A) or powder coated (P). Some of the costs for each process are shown in the table below. The incremental cash flow future worth equation associated with (P €“ A) is:0 =
For the two alternatives, demonstrate that the sum of the incremental cash flow series (Z ˆ’ X) over the LCM is equal to the difference in the sums of the individual cash flow series for X and Z. System First cost, $ AOC, $ per year Salvage value, $ -40,000 -95,000 - 12,000 6,000 3 -5,000
For the cash flows shown, determine the incremental cash flow between machines B and A(a) In year 0,(b) in year 3,(c) in year 6. Machine First cost, $ AOC, $ per year A -15,000 -25,000 -1,600 3,000 -400 Salvage value, $ Life, years 6,000 3 6.
For each of the following scenarios, state whether an incremental ROR analysis is required to select an alternative and state why or why not. Assume that alternative Y requires a larger initial investment than alternative X and that the MARR is 20% per year.(a) X has a rate of return of 22% per
Amigo Mobility, which manufactures battery powered mobility scooters, has $700,000 to invest.The company is considering three different battery projects that will yield the following rates of return:Deep cycle = 28%Wet/flooded = 42%Lithium ion = 19%The initial investment required for each project
Assume you have a total of $200,000 to invest in two corporate stocks identified as Z1 and Z2. The overall rate of return you require on the $200,000 is 26% per year.(a) If $40,000 is invested in Z2 with an estimated i*Z2 of 14% per year, what value must i*Z1 exceed to realize at least 26% per
A small construction company has $100,000 set aside in a capital improvement fund to purchase new equipment. If $30,000 is invested at 30%, $20,000 at 25%, and the remaining $50,000 at 20% per year, what is the overall rate of return on the entire $100,000?
What is the overall rate of return on a $100,000 investment that returns 20% on the first $30,000 and 14% on the remaining $70,000?
Why is an incremental analysis necessary when conducting a rate of return analysis for cost alternatives?
If alternative A has i*A = 10% and alternative B has i*B = 18% per year, what is known about the rate of return on the increment between A and B if the investment required in B is(a) Larger than that required for A,(b) Smaller than that required for A?
A food processing company is considering two types of moisture analyzers. Only one can be selected. The company expects an infrared model to yield a rate of return of 27% per year. A more expensive microwave model will yield a rate of return of 19% per year. If the company’s MARR is 19% per year,
Incremental cash flow is calculated as (cash flowB− cash flowA), where B represents the alternative with the larger initial investment. If the two cash flows were switched wherein B represents the one with the smaller initial investment, which alternative should be selected if the incremental
If the sum of the incremental cash flows is negative, what is known about the rate of return on the incremental investment?
Schneeberger, Inc. is considering two alternatives to increase the acceleration of its linear motor actuators. The initial investment required in alternative X is $200,000 and in Y is $150,000. The MARR = 20% per year; a total of $200,000 is available for investment; and the rates of return are i
What is the primary purpose of a public sector project?
Assume alternatives A and B are being evaluated by the rate of return method against a MARR of 15% per year. Alternative B requires a higher initial investment than A and the i* values are i *A = 20% and i *B = 16% per year. Under what circumstance is alternative B the preferred choice?
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