1) You invest $25,000 now and receive $3,000 per year for 25 years starting at the end of the first year. What is the payback period in whole number years for this investment? In other words, in what year do you break even on this investment? Use i = 8% annual rate compounded annually, and use the discounted payback approach (not Simple Payback). Discounted payback years answer_____________________

2) A machine costs $50,000, and increases revenues by $18,000 per year. However, O&M costs increase by $4,000 per year. The machine lasts 6 years and your MARR is 7% annual rate compounded annually. What is the Present Worth (or Net Present Value)? _____________________ Should you purchase the machine? (One sentence answer why or why not)__________________________________

3) Maintenance costs on a bridge are $3,000 every third year starting at the end of year 3. For analysis purposes, the bridge is assumed to have an infinite life. What is the Capitalized Equivalent (CE) cost of these infinite payments, assuming an annual interest rate of 9% compounded annually? Answer _____________________

4) Machine A costs $20,000, lasts 3 years and has a salvage value S of $3,000. Machine B costs $12,000, lasts 2 years and has a salvage value of $2,000. The machines can be purchased at the same price with the same salvage value in the future, and are needed for a 6 year project. Which Machine would you purchase and why? Provide justification using an Annualized Equivalent Cost analysis. Answer _______________________________________________________

5) You purchase a machine for $50,000 now, with a salvage value of $12,000 in 10 years. The machine will have O&M costs and cost of raw goods totaling $25,000 per year. The machine will produce 3,200 high-quality parts per year. If i = 10% annual rate compounded annually, what is the cost per high-quality part produced? Answer _____________________

6) You can choose between two purchases: Machine A or Machine B. Machine A costs $20,000 and has a salvage value of $6,000 after 4 years. Machine B costs $28,000 and has a salvage value of $4,000 after 5 years. You can lease a Machine B equivalent for $5,000 per year, if you initially purchased Machine B. You need a machine for a total of 8 years, and can purchase a new machine in the future at the same price with the same salvage value. If i is 10% annual rate compounded annually, which machine should be purchased? Show work and justify answer