Engineering Economics/Construction Project Management Question 1. Your company is evaluating the three mutually exclusive mechanical systems shown in the table below. Using a MARR of 15%, which alternative should be chosen? A B C Investment $110,000 $1

A

B

C

Investment

$110,000

$125,000

$138,000

Useful life

10 years

10 years

10 years

Total annual expenses

$53,800

$51,625

$45,033

a.

Alternative C

b.

Alternative A

c.

Alternative B

A

B

C

D

E

F

Capital Investment

$900

$1,500

$2,500

$4,000

$5,000

$7,000

Annual Revenues

150

276

400

925

1,125

1,425

IRR on total CF

10.6%

13.0%

9.6%

19.1%

18.3%

15.6%

∆(B – A)

∆(D – B)

∆(E – D)

∆(F – E)

∆ Capital Investment

$600

$2,500

$1,000

$2,000

∆ Annual Revenues

$126

$649

$200

$300

∆ IRR

16.4%

22.6%

15.1%

8.1%

a.

Alternative B

b.

None of the above

c.

Alternative D

d.

Alternative A

e.

Alternative E

f.

Alternative F

g.

Alternative C

Alt. A

Alt. B

Alt. C

Alt, D

Investment

$23M

$18M

$31M

$26M

Annual O&M

$1.8M

$1.2M

$2.1M

$2.0M

Salvage Value

$2.4M

$2.2M

$4.0M

$3.1M

Annual Benefits

$5.0M

$4.5M

$6.5M

$5.8M

Useful Life

50 years

50 years

50 years

50 years

a.

Alt. C

b.

Alt. A

c.

Alt. D

d.

None should be selected 

e.

Alt. B