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1. A company is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $900,000 now and $580,000 two years

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1. A company is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $900,000 now and $580,000 two years from now, with annual M&O costs of $79,000 in years 1 through 10. Option 2 involves subcontracting some of the production at costs of $280,000 per year beginning now through the end of year 10. Neither option will have a significant salvage value. Use a present worth analysis to determine which option is more attractive at the company's MARR of 15% per year. 2. Estimates for two projects are shown below. Which should be selected on an economic basis of present worth values at an interest rate of 12% per year? Project First cost, $ Maintenance cost, S/year Salvage value, $ Life, years A -205,000 -29,000 2,000 2 B -235,000 -27,000 20,000 4 3. Compare two alternatives, A and B, on the basis of a present worth evaluation using i = 10% per year and a study period of 8 years. A -15,000 -6,000 Alternative First cost, $ Annual operating cost, $/year Overhaul in year 4, S Salvage value, $ Life, years B -28,000 -9,000 -2000 5,000 8 3,000 4 4. An electric switch manufacturing company is trying to decide between three different assembly methods. Method A has an estimated first cost of $40,000, an annual operating cost (AOC) of $9000, and a service life of 2 years. Method B will cost $80,000 to buy and will have an AOC of $6000 over its 4-year service life. Method C costs $130,000 initially with an AOC of $4000 over its 8-year life. Methods A and B will have no salvage value, but Method C will have equipment worth 10% of its first cost. Perform a future worth analyses to select the method at an MARR of 12% per year. 5. A city is to build a new football stadium that will cost $220 million. Annual maintenance is expected to amount to $750,000. The grass will have to be replaced every 10 years at a cost of $950,000. If the city expects to maintain the facility indefinitely, what is the estimated capitalized cost at i = 9% per year

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