8.3 The following table gives more information about the alternatives A, B, and C analyzed in Question 4.4 by Group 4. a) Using a study period of 3 years and a MARR of 6%, complete the table by entering the values of capital recovery and annual worth for each alternative. Which alternative will you choose? [Note: In your answer, first include the equations of CR and AW that you will use to derive their values to complete the table. Indicate clearly in the CR equation the appropriate interest factors and their values.] B C Alternatives Capital investment (I) Annual revenues (R) Annual expenses (E) Salvage value (S) Life (years) Capital recovery (CR) Annual worth (AW) $100,000 $6,000,000 $3,900,000 $100,000 $120,000 $10,000,000 $5,500,000 105,000 $220,000 $12,000,000 $6,000,000 $120,000 b) Compare your answer to (a) above with the answer to Question 4.4 (a). Explain how the decision made in 4.4 (a) as an economist and your decision made as an engineer are related. (Hint: Questions 4.4 and 8.3 are based on the same alternatives A, B, and C. The values of CR and AW you derive in (a) should correspond to the values of annual capital cost and profit in 4.4 (a), respectively. The small differences between their values are due to rounding.] c) Can the assumption of repeatability be adopted for the long-run analysis of these three alternatives? In particular, if all three alternatives can be repeated, can you assume that their cash flows in the subsequent 3-year cycles remain the same? Explain your answer with reference to the answer to Question 4.4 (b) presented by Group 4. 8.3 The following table gives more information about the alternatives A, B, and C analyzed in Question 4.4 by Group 4. a) Using a study period of 3 years and a MARR of 6%, complete the table by entering the values of capital recovery and annual worth for each alternative. Which alternative will you choose? [Note: In your answer, first include the equations of CR and AW that you will use to derive their values to complete the table. Indicate clearly in the CR equation the appropriate interest factors and their values.] B C Alternatives Capital investment (I) Annual revenues (R) Annual expenses (E) Salvage value (S) Life (years) Capital recovery (CR) Annual worth (AW) $100,000 $6,000,000 $3,900,000 $100,000 $120,000 $10,000,000 $5,500,000 105,000 $220,000 $12,000,000 $6,000,000 $120,000 b) Compare your answer to (a) above with the answer to Question 4.4 (a). Explain how the decision made in 4.4 (a) as an economist and your decision made as an engineer are related. (Hint: Questions 4.4 and 8.3 are based on the same alternatives A, B, and C. The values of CR and AW you derive in (a) should correspond to the values of annual capital cost and profit in 4.4 (a), respectively. The small differences between their values are due to rounding.] c) Can the assumption of repeatability be adopted for the long-run analysis of these three alternatives? In particular, if all three alternatives can be repeated, can you assume that their cash flows in the subsequent 3-year cycles remain the same? Explain your answer with reference to the answer to Question 4.4 (b) presented by Group 4
