Assignment 11-2 The Universal Postal Service is considering the possibility of fixing wind deflectors on the tops of 500 of their long-haul tractors. Three types of deflectors, with the following characteristics, are being considered (MARR = 10% per year): Windshear Blowby Air-vantage Capital investment $1,200 $500 $1,500 Drag reduction 20% 10% 25% Maintenance per year $8 $8 Useful life If 5% in drag reduction means 2% in fuel savings per mile, how many miles do the tractors have to be driven per year before the Windshear deflector is favored over the other deflectors? Over what range of miles driven per year is Air-vantage the best choice? (Note: fuel cost is expected to be $4.00 per gallon, and average fuel consumption is 5 miles per gallon without the deflectors.) State any assumptions you make. $14 10 years 8 years 5 years Assignment 11-3 A bridge is to be constructed now as part of a new road. Engineers have determined that traffic density on the new road will justify a two-lane road and a bridge at the present time. Because of uncertainty regarding future use of the road, the time at which an extra two lanes will be required is currently being studied. The two-lane bridge will cost $200,000 and the four-lane bridge, if built initially, will cost 350,000. The future cost of widening a two-lane bridge to four-lanes will be an extra 200,000 plus $25,000 for every year that widening is delayed. The MARR used by the highway department is 12% per year. The following estimates have been made of the times at which the four- lane bridge will be required: Pessimistic estimate: 4 years Most likely estimate: 5 years optimistic estimate: 7 years In the view of these estimates, what would you recommend? What difficulty, if any, do you have in interpreting your result? . . Assignment 11-4 Suppose that, for an engineering project, the optimistic, most likely, and pessimistic estimates are as shown in the accompanying table. Develop a spreadsheet to determine the AW for each of the three estimate conditions. It is thought that the most critical elements are useful life and net annual cash flow. Include in your spreadsheet a table showing the AW for all combinations of the estimates for these two factors, assuming that all other factors remain at their most likely values. Pessimistic $120,000 12 years 6 years Optimistic Capital investment $90,000 Useful life Market value $30,000 Net annual cash flow $35,000 MARR (per year) 11% Most Likely $100,000 10 years $20,000 $30,000 11% $0 $20,000 11%