exam help
04/04/2019
1. There are two mutually exclusive alternatives A and B for a security system.
a) Calculate the capitalized cost of alternative B ; (7 pts)
b) Use annual worth analysis and an interest rate of 20% per year to compare these two alternatives and select the more economical one. (13 pts)
|
Year |
Alt. A |
Alt. B |
|
First cost, $ |
-15,000 |
-45,000 |
|
Annual cost, $ per year |
-7,000 |
-2,500 |
|
Salvage value, $ |
4,000 |
- |
|
Life, years |
5 |
|
2. (20 points) Calculate the Internal rate of return (ROR) for the following system assuming a system life of 10 years. If your company’s MARR is 18%, is this a good investment?
|
|
|
|
Initial Cost (Year 0) |
$100K |
|
Annual cost, $ per year |
$8K |
|
Annual Revenue, $ per year |
$38K |
|
Salvage value (Year 10) |
$14,715.50 |
|
MARR Value |
18% |
A. Draw a cash flow diagram (5pts)
B. Write out the equation you will use to find the ROR (5pts)
C. Calculate the ROR for the project. (5pts)
D. Tell me if it is a good project of not. (5pts)
3. (20 points) UPS Freight plans to purchase new long-haul tractor-trailers. Some of these vehicles will include a new shelving design with adjustable shelves to transport irregularly sized freight that requires special handling during loading and unloading. The director wants an annual worth analysis performed on the two final designs based on a project life of 12 years. Compare the alternatives at the MARR of 18% per year. (all dollar values are in thousands)
|
|
Design A Movable shelves |
Design B Adoptable frames |
|
First Cost, $ |
-1,800 |
-1,100 |
|
AOC, $ per year |
-130 |
-85 |
|
Salvage value, $ (at 6 years) |
50 |
|
|
Salvage value, $ (at 4 years) |
|
20 |
|
Salvage value, $ (at 2 years) |
100 |
50 |
|
Annual revenue, $ per year |
800 |
625 |
|
Life, years |
6 |
4 |
4. (20 points) The director now wants you to do the same annual worth analysis performed on the two final designs based on a project life of 8 years. Compare the alternatives at the MARR of 18% per year. (all dollar values are in thousands)
1
0
4
/
04
/2019
1
1.
There are two mutually exclusive
alt
ernatives
A and B
for a security system
.
a)
Calculate the
capitalized cost
of alternative
B
;
(7 pts)
b)
Use
annual worth
analysis and an interest rate of
2
0% per year to compare these two
alternatives and select the more economical one.
(13 pts)
Year
Alt. A
Alt. B
First cost, $
-
1
5,000
-
45
,000
Annual cost, $ per year
-
7
,000
-
2,500
Salvage value, $
4
,000
-
Life, years
5
8
04/04/2019
1
1. There are two mutually exclusive alternatives A and B for a security system.
a) Calculate the capitalized cost of alternative B; (7 pts)
b) Use annual worth analysis and an interest rate of 20% per year to compare these two
alternatives and select the more economical one. (13 pts)
Year Alt. A Alt. B
First cost, $ -15,000 -45,000
Annual cost, $ per year -7,000 -2,500
Salvage value, $ 4,000 -
Life, years 5 8