1. Acme Molding is examining 5 alternatives for a piece of material handling equipment. Each has an expected life of 8 years with no salvage value, and Acme's MARR is 12%. Using an incremental analysis, which material handling alternative should be chosen?

2. Consider the three small mutually exclusive investment alternatives in the table below. The feasible alternative chosen must provide service for a 10-year period. The MARR is 12% per year, and the market value of each is 0 at the end of useful life. State all assumptions (repeatability / co terminated) you make in your analysis. Which alternative should be chosen?(make a cash flow diagram)

3. There is a continuing requirement for stand by electrical power at a public utility service facility. Alternative A involves an initial cost of $72,000, a 3-year useful life, and an annual cost of $2,200 the first year and increasing $300 per year thereafter and a net salvage value of $8,400 at the end of the useful life. Alternative B has an initial cost of $90,000, a six-year useful life, and annual cost of 2,100 and a net salvage value of $13,000. The current interest rate is 10% annually. What alternative are you going to recommend if you use the repeatability (study period is 6 years) and co terminated (study period is 3 years) assumptions?

4. The estimated capital investment and the annual expenses) for four alternative designs of a diesel-powered air compressor are shown below, as well as the estimated market value for each design at the end of the common five-year useful life. The study period is five years, and the MARR is 20% per year. One of the designs must be selected for the compressor, and each design provides the same level of service. On the basis of this information, (a) Determine the preferred design alternative, using the IRR method (b) Show that the FW method (i=MARR), using the incremental analysis procedure, results in the same decision.

1. Acme Molding is examining 5 alternatives for a piece of material handling equipment. 3. There is a continuing requirement for stand by electrical power at a public utility Each has an expected life of 8 years with no salvage value, and Acme's MARR is 12%. service facility. Alternative A involves an initial cost of $72,000, a 3-year useful life, Using an incremental analysis, which material handling alternative should be chosen? and an annual cost of $2,200 the first year and increasing $300 per year thereafter Alternative and a net salvage value of $8,400 at the end of the useful life. Alternative B has an initial cost of $90,000, a six-year useful life, and annual cost of 2,100 and a net A B C D E salvage value of $13,000. The current interest rate is 10% annually. What alternative Capital $12,000 $12,500 $14,400 $20000 $16250 are you going to recommend if you use the repeatability (study period is 6 years) and co terminated (study period is 3 years) assumptions? investment Net annual $2,500 $2,520 $3.050 $4500 $3600 income 4. The estimated capital investment and the annual expenses) for four alternative designs of a diesel-powered air compressor are shown below, as well as the estimated market value for each design at the end of the common five-year useful 2. Consider the three small mutually exclusive investment alternatives in the table life. The study period is five years, and the MARR is 20% per year. One of the below. The feasible alternative chosen must provide service for a 10-year period. designs must be selected for the compressor, and each design provides the same level The MARR is 12% per year, and the market value of each is 0 at the end of useful of service. On the basis of this information, life. State all assumptions (repeatability / co terminated) you make in your analysis. (a) Determine the preferred design alternative, using the IRR method Which alternative should be chosen? (b) Show that the FW method ({=MARR), using the incremental analysis procedure, results in the same decision. A B C Capital investment $2,000 $8,000 $20,000 Design Alternative Annual revenues less 600 2,200 3.600 D1 D2 D3 D4 expenses Useful life (years) 5 5 10 Capital investment $100.000 $140.600 $148.200 $122,000 Annual expenses 29.000 16.900 14.800 22.100 Useful life (years) 5 5 5 Market value 10.000 14,000 25.600 14.000