11-27. The worlds largest carpet maker has just completed a feasibility study of what to do with...

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11-27. The world’s largest carpet maker has just completed a feasibility study of what to do with the 16,000 tons of overruns, rejects, and remnants it produces every year. The company’s CEO launched the feasibility study by asking, Why pay someone to dig coal out of the ground and then pay someone else to put our waste into a landfill? Why not just burn our own waste? The company is proposing to build a

$10-million power plant to burn its waste as fuel, thereby saving $2.8 million a year in coal purchases. Company engineers have determined that the waste-burning plant will be environmentally sound, and after its four-year study period the plant can be sold to a local electric utility for $5 million.

The firm’s MARR is 15%. Develop a spreadsheet to investigate the sensitivity of the proposal’s PW to changes in the estimates of

(a) initial investment amount, (b)

annual savings of fuel cost, and

(c) future resale value of the plant. To which factor is the decision most sensitive?

Include in your solution the specific values of these factors that would cause decision reversal. Use the charting feature to create a spiderplot. (11.3)

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Engineering Economy

ISBN: 9781292265001

17th Global Edition

Authors: William G. Sullivan ,Elin M. Wicks ,C. Patrick Koelling

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