A city water and waste-water department has a four-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an additional four years, or it can be sold for $35,000 and replaced by a new pump. The purchase price of the replacement pump is $50,000. The projected MVs and operating and maintenance costs over

Chapter 9, Problem #8

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A city water and waste-water department has a four-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an additional four years, or it can be sold for $35,000 and replaced by a new pump. The purchase price of the replacement pump is $50,000. The projected MVs and operating and maintenance costs over the four-year planning horizon are shown in the table that follows. Assuming the MARR is 10%, (a) determine the economic life of the challenger and (b) determine when the defender should be replaced.

Defender Challenger MV at O&M MV at O&M EOY Cost EOY Cost Year $25,000 $18,500 21,000 17,000 13,000 $40,000 $13,000 32,0

MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
Related Book For answer-question

Engineering Economy

16th edition

Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

ISBN: 978-0133439274