Question: Case Study ( 80 points ) In order to get full-credit you must show all of your workings including formulas, factor values used, etc. The
Case Study (80 points)
In order to get full-credit you must show all of your workings including formulas, factor values used, etc.
The case study covers material from Module 4 (i.e. Annual worth analysis). In order to do well on the case study you should go through Module 4 including the solutions to HW4 and Exam 4.
Case Study: THE CHANGING SCENE OF AN ANNUAL WORTH ANALYSIS
Harry, owner of an automobile battery distributorship has decided to place surge protectors in-line for all his major pieces of testing equipment. Two different manufacturers protectors need to be compared using a MARR of 15%.
Scenario 1: PowrUp and Lloyds have submitted the following economic information (See table below)
| PowrUp | Lloyd's | ||
| Cost and installation, $ | -26,000 | -36,000 | |
| Annual maintenance cost, $ per year | -800 | -300 | |
| Salvage value, $ | 2,000 | 3,000 | |
| Annual repair savings, $ per year | 25,000 | 35,000 | |
| Useful life, years | 6 | 10 |
Q 1a) Calculate the annual worth of the PowrUp protectors (10 points)
Q 1b) What is the capital recovery amount for the PowrUp protectors? (3 points)
Q 1c) Calculate the annual worth of the Lloyd protectors (10 points)
Q 1d) What is the capital recovery amount for the Lloyds protectors? (3 points)
Q 1e) Which manufacturers protectors should be selected by Harry using annual worth analysis (4 points)
Scenario 2: Lloyds have recently revised their economic estimates which are shown in the table below.
| Lloyd's (new estimates) | |||||
|
| Initial investment | Upgrade cost | Salvage value | Annual maint. | Repair savings |
| Year | |||||
| 0 | -$36,000 | ||||
| 1 | -$300 | $35,000 | |||
| 2 | -$300 | $32,000 | |||
| 3 | -$300 | $28,000 | |||
| 4 | -$1,200 | $26,000 | |||
| 5 | -$1,320 | $24,000 | |||
| 6 | -$9,000 | -$1,452 | $22,000 | ||
| 7 | -$1,597 | $20,000 | |||
| 8 | -$1,757 | $18,000 | |||
| 9 | -$1,933 | $16,000 | |||
| 10 | $1,000 | -$2,126 | $14,000 | ||
Using these new estimates, answer the following questions:
Q 2a) What is the recalculated AW for the Lloyds protectors? (36 points)
Q 2b) What is the recalculated capital recovery amount for the Lloyds protectors? (10 points)
Q 2c) Which manufacturers protectors should now be selected by Harry using annual worth analysis (4 points)
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
Study Help