Case Study

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 Lloyd's have submitted the following economic information (See table below) Cost and installation, $ PowrUp -26,000 Lloyd's -36,000 Annual maintenance cost, $ per year -800 -300 Salvage value, $ 2,000 3,000 Annual repair savings, 25,000 35,000 $ per year Useful life, years 10 Q la) Calculate the annual worth of the "PowrUp" protector's (10 points) Q 1b) What is the capital recovery amount for the PowrUp protectors? (3 points) Q1c) Calculate the annual worth of the "Lloyd" protector's (10 points) Qld) What is the capital recovery amount for the Lloyd's protectors? (3 points) Qle) Which manufacturers' protectors should be selected by Harry using annual worth analysis (4 points) Scenario 2: Lloyd's have recently revised their economic estimates which are shown in the table below. Lloyd's (new estimates) Yea r Initial investment cost Upgrade Salvage value Annual Repair maint. savings 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: Q2a) What is the recalculated AW for the Lloyd's protectors? (36 points) Q2b) What is the recalculated capital recovery amount for the Lloyd's protectors? (10 points) Q2c) Which manufacturers' protectors should now be selected by Harry using annual worth analysis (4 points)