Economic Analysis for Engineers

Assume that the system will operate for 260 business days annually.

(1) Perform a present value analysis to select the best alternative:

(a) Consider that the replacements will be for identical units (b) The equipment has no residual value (c)Analyze a 30-year horizon (d)Consider an interest rate of 6%

(2) Realice a sensitivity analysis, keeping the parameters of the centrifuge system constant, and changing the life of the console system from 5 years to a maximum of 10 years. (3) Perform a "What if " analysis for the centrifuge system, changing the life of the centrifuge to 10 years and the handlers to 25 years.

(4) Consider that the equipment will be acquired by a manufacturing industry. Assume that the console system previously analyzed will be used to provide air conditioning in a manufacturing industry. It will be installed in a certain production area that generates an income of $450,000 gross per year. Operating costs are $125,000 annually.

(a) Depreciate the console system, in operational state, using the Straight Line Method. (b) Determine the cash flow after taxes.

(c) Calculate the internal rate of return before and after taxes. perform the scan only for the first time the computer is installed (first cycle, depending on the life of the consoles)

*The use of EXCEL is recommended to facilitate computations. You will need to display the computations (in Excel or by hand, if you decide not to use the Excel functions). IF ITS IN EXCEL DO IT STEP BY STEP BUT IT WOULD BE BETTER BY HAND*

The teachers' office area in the Antonio Lucchetti building has problems associated with the air conditioning system. Currently the existing system is centrifugal. The Department of Buildings and Land is evaluating two alternatives to address the situation. The first alternative is to replacetheso-ton chiller, the handler system and its insuktion system. The initial costs are as follows: 30 years Unit Cost Life Centrifuge 50 tons $33,000 15 years Handlers $47,000 Installation work $1,400 N/A Initial Installation Materials $2,500 N/A Insulation system $22,000 N/A *Reduced to 40% of the original cost in case of equipment replacement. ** The cost of replacement materials is also assumed at 40% of the original cost. The maintenance of the centrifuge consists of Maintenance work gost Duration of work 1 day Cleaning every 6 months Personnel requirements 1 technician 1 assistant 1 technician 1 assistant Monthly salary $1,550 $1,515 $1,550 $1,515 1/2 day $1,000 Annual water pump maintenance Annual visit of the manufacturer Replacement of fans ey three years 1 hour 3150 i technician 1 assistant $1,550 $1,515 The maintenance is carried out by personnel of the Refrigeration Workshoporattached to the Department of buildings and Land of the land. The total hours that a regular employee works in the Bocessure 1.950 hours per year at a rate of 7-5 hours per day. You shouldcalculate the cost associated withthe time that personne spend on the maintenance of this particular equipment.) The additional costs 25sociated with the operation of the centrifuge are as follows: Cost Cost item cod water pipe insulation Replacement Frequency Ever 5MBECS 522,000 The costs associated with the electric ty consumption of the centrifuge system are as follows: The cost of a 50-ton centrifuge for daily electricity consumption issi 50 per day The cost for electric ty consumption of the handler is $ 25 per day The centrifuge system operates continuously The second alternative is the installation of a system of individual units consisting of four capacitors and 41 consoles.. The initial costs are as follows: Cost item Unit cost Units Total cost Life Capacitor MDV 400 $9,000 6 years Capacitor MDV 450 $9,700 6 years Consoles 12,000 BTU $700 31 6 years Consoles 19,000 BTU $900 6 years Materials $35,000 N/A Installation work*.** $18,000 N/A Includes materials for the insulation system. The cost of materials for the replacement of the consoles is ignored. Replacement work is reduced to 80% of the original cost. BONN System maintenance consists of Maintenance work Units Duration of work 1.5 hours Cost of parts to replace $30/unit 41 Personnel requirements 1 technician 1 assistant 1 technician 1 assistant 1 technician 1 assistant Monthly salary $1,550 $1,515 $1,550 $1,515 1 technician 1 assistant Console cleaning and filter replacement once a year Condenser cleaning once a year Replacement of console removal pump, every 3 years 4. 1 hour 41 1/4 day $50/unit The maintenance is carried out by personnel of the Refrigeration Workshoporattached to the Department of Buildings and Land of the land. The total hours that a regular employee works in the Enclosure is 1,950 hours per year, at a rate of 7.5 hours per day. (You shouldcalculate the cost associated with the time staff spends on the maintenance of this particular equioment.) the additional costs associated with operating the console system are as follows Costitem Frequency Cost Refrigerant Pipe Insulation Every 12 years $12.000 Replacement The costs associated with the electrical consumption of the console system are as follows: The cost for electricity consumptien of the entire console system is $175 per cay, at the rate of 12 hours per day