engineering economics

Pencere A.7. Your client, a contractor, needs some new trucks to complete a project currently under con- tract. Analyze the three alternative types of trucks on the basis of the information listed below, and advise which is the best buy. Type of truck Annual increase in O & M costs Annual O&M cost Cost new Resale value at EOY 4 A B $50,000 56.000 65,000 1.70/mi 1.60 1.50 $0.16/mi/yr 10.16 0.09 $10,000 15,000 15.000 The trucks will average 20,000 miles per year and will be sold at the end of four years for the resale values listed. (a) Find the incremental rate of return between A and B. (Hint: Try i for B-A between 30 and 40 percent.) (b) Assume the IROR of C-A is 26.7 percent and that of C-B is 23.9 percent. Draw an arrow diagram showing the IROR values and tell what ranges of MARR favor which alternatives. (c) Show which alternative is recommended if the contractor's MARR = 15 percent. (Ans. (a) B-A IROR = 30.7%; (b) if MARR > 30.7%, select A; if 30.7% > MARR > 23.9%, select B; if MARR 30.7%, select A; if 30.7% > MARR > 23.9%, select B; if MARR