9-50

og of the canning seas TQUES in June, at the beginning of will save $500 per month for the the plant is in operation. Mai be 4 months each Maintenance Co temative has a 6-year useful life and no sal- me. The MARR is 9%. Which alternative ing machine are expected ered to be no Each alternativ vage value. The Initial the case-sealing machine gible. The case-sealin The case-sealing machine is is expected seasons and then is the tayback per re to be pro- ests $6.2.000 d the c- chine, one $32.000 10 salvage the 2-year equipment What is buy the A useful for five annual cannings have no salvage value. What is th What is the nominal annual should be selected, based on (a) The payback period (b) Future worth analysis c) Benefit-cost ratio analysis Cos Annual Revenues Length of Ownership inal annual rate o m vesting it of 8210 Consider three alternatives: 9.48 A large project requires a Consider three 0.51 ar lion. The construction will take 3 will be spent during the first year in the second year, and $70 milli 5 million wuring the thin A $50 30 $150 45 Conti Univ Thre cons. $110 45 struction. Two project sidered: 10 years 9-54 . a year of construction. Two are being considered: software ould buy ware for switch ration pero the expect ti the First cost Uniform annual benefit Useful life, in years 39 ear 20 years Smil per year. For sted that all cas stupany matum Initi Ben cel the e end of its useful life, an identical alternative th the same cost, benefits, and useful life) may be Uni ftware, installed years. d on a pot profit of $50 million per year the expected net profit of $35 mil simplicity of calculations it is assu flows occur at end of year, mauired return on investment is 1596 Calculate for each alternative: (a) The payback period (b) The total equivalent investment co of the construction period The equivalent uniform annual worth project (use the operation period alternative) Which operation period should be chosen? iment cost at the end costs Fonal worth of the period of each All the alternatives have no salvage value. If the MARR is 10%, which alternative should be selected? (a) Solve the problem by payback period. (b) Solve the problem by future worth analysis. (c) Solve the problem by benefit-cost ratio analysis. (d) If the answers in parts (a), (b), and (c) differ, explain why this is the case. Consider three mutually exclusive alternatives. The MARR is 10% atis- ring olar 9-55 Eric 9-49 Two alternatives with identical benefits a considered: 5 TB Year 0 -$125 - $60 to Initial cost Uniform annual cost Useful life, in years $500 200 8 150 I (a) Compute the payback period if Alt. B is purchased rather than Alt. A. (b) Use a MARR of 10% and benefit-cost ratio analysis to identify the alternative that should be selected 9-50 Consider four mutually exclusive alternatives: (a) For Alt. X, compute the benefit-cost ratio. (b) Based on the payback period, which alternative should be selected? (C) Determine the preferred alternative based on an exact economic analysis method. Cost Uniform annual benefit A $65 16.3 B $55 15.1 C $25 5.2 D $80 21.3 You are an investor who wants to make your invest- ment back as quickly as possible. There are four potential projects that you can invest in. Which project should you choose