CASE STUDY ANNUAL WORTH ANALYSIS-THEN AND NOW Background and Information Harry, owner of an automobile battery distributorship in Atlanta, Georgia, performed an economic analysis 3 years ago when he decided to place surge protectors in-line for all his major pieces of testing equipment. The estimates used and the annual worth analysis at MARR - 15are summarized below. Two different manufacturers protectors were compared Powrp Lloyd's -26,000 --36,000 Cost and installation, Annual maintenance cost, Sper year Salvage value, s Equipment repair savings, S -800 2,000 3.000 25,000 35.000 Useful life, years 6 10 The spreadsheet in below sheet is the one Harry used to make the decision. Lloyd's was the clear choice due to its substantially larger AW value. The Lloyd's protectors were installed. MARR 15 Investment PoweUp Annual Lloyd's Annual Repair Investment Real Click Save and show and wil. Click SAVAS Save and Sub The spreadsheet in below sheet is the one Harry used to make the decision, Lloyd's was the clear choice due to its substantially larger AW value. The Lloyd's protectors were installed. MARR 15% 888888 PoweUp Investment Lloyd's Annual Years Repair Investment and salvage maintenance Annual Repair saving 0 $25,000 and salvage maintenance saving SO 30 -$36.000 SO 1 50 -$800 $25,000 50 -$300 2 3800 $35.000 525.000 $0 $300 3 335.000 $25.000 50 $300 $35.000 4 -5800 $25.000 50 -$300 $35.000 5 $25.000 50 -$300 $35.000 6 3800 $25.000 50 -5100 $15.000 7 $2,000 $25,000 50 -5300 $35.000 $0 -$300 $35.000 $0 $300 $35.000 10 $3,000 $300 $35,000 AW element -$6,068 -5.900 $25,000 -$300 $35,000 Total AW $18,131,35 $27.6746 During a quick review this last year (year 3 of operation, it was obvious that the maintenance costs and repair savings have not followed and will not follow the estimates made 3 years ago. In fact. the maintenance contract cost (which includes quarterly inspection) is going from $300 to $1200 per year next year and will then increase 12% per year for the next 10 years. Also, the repair savings for the last 3 years were $32.587. $21.918, and $33,236, as best as Harry can determine. He believes savings will decrease by $1,60 per year hereafter. Finally, these 3 year-old protectors are worth nothing on the market now, so the sale in 7 years lazuro, not $30. Click and subent and CAVA Sve Mens og from $300 to $1200 per year for the next 10 years. Also, the repair savings years were $32,587, $21,918, and $33,236, as best as Harry can determine. He elieves savings will decrease by $1,630 per year hereafter. Finally, these 3-year-old protectors are orth nothing on the market now, so the salvage in 7 years is zero, not $3000. fase Study Exercises Q1- Plot a graph of the newly estimated maintenance costs and repair savings projections, assuming the protectors last for seven more years. Q2- With these new estimates, what is the recalculated AW for the Lloyd's protectors? Use the old first cost and maintenance cost estimates for the first 3 years, type your answer in the answer box Q3- If these estimates had been made 3 years ago, would Lloyd's still have been the economic 04- How has the capital recovery amount changed for the Lloyd's protectors with these new estimates? choice CASE STUDY ANNUAL WORTH ANALYSIS-THEN AND NOW Background and Information Harry, owner of an automobile battery distributorship in Atlanta, Georgia, performed an economic analysis 3 years ago when he decided to place surge protectors in-line for all his major pieces of testing equipment. The estimates used and the annual worth analysis at MARR - 15are summarized below. Two different manufacturers protectors were compared Powrp Lloyd's -26,000 --36,000 Cost and installation, Annual maintenance cost, Sper year Salvage value, s Equipment repair savings, S -800 2,000 3.000 25,000 35.000 Useful life, years 6 10 The spreadsheet in below sheet is the one Harry used to make the decision. Lloyd's was the clear choice due to its substantially larger AW value. The Lloyd's protectors were installed. MARR 15 Investment PoweUp Annual Lloyd's Annual Repair Investment Real Click Save and show and wil. Click SAVAS Save and Sub The spreadsheet in below sheet is the one Harry used to make the decision, Lloyd's was the clear choice due to its substantially larger AW value. The Lloyd's protectors were installed. MARR 15% 888888 PoweUp Investment Lloyd's Annual Years Repair Investment and salvage maintenance Annual Repair saving 0 $25,000 and salvage maintenance saving SO 30 -$36.000 SO 1 50 -$800 $25,000 50 -$300 2 3800 $35.000 525.000 $0 $300 3 335.000 $25.000 50 $300 $35.000 4 -5800 $25.000 50 -$300 $35.000 5 $25.000 50 -$300 $35.000 6 3800 $25.000 50 -5100 $15.000 7 $2,000 $25,000 50 -5300 $35.000 $0 -$300 $35.000 $0 $300 $35.000 10 $3,000 $300 $35,000 AW element -$6,068 -5.900 $25,000 -$300 $35,000 Total AW $18,131,35 $27.6746 During a quick review this last year (year 3 of operation, it was obvious that the maintenance costs and repair savings have not followed and will not follow the estimates made 3 years ago. In fact. the maintenance contract cost (which includes quarterly inspection) is going from $300 to $1200 per year next year and will then increase 12% per year for the next 10 years. Also, the repair savings for the last 3 years were $32.587. $21.918, and $33,236, as best as Harry can determine. He believes savings will decrease by $1,60 per year hereafter. Finally, these 3 year-old protectors are worth nothing on the market now, so the sale in 7 years lazuro, not $30. Click and subent and CAVA Sve Mens og from $300 to $1200 per year for the next 10 years. Also, the repair savings years were $32,587, $21,918, and $33,236, as best as Harry can determine. He elieves savings will decrease by $1,630 per year hereafter. Finally, these 3-year-old protectors are orth nothing on the market now, so the salvage in 7 years is zero, not $3000. fase Study Exercises Q1- Plot a graph of the newly estimated maintenance costs and repair savings projections, assuming the protectors last for seven more years. Q2- With these new estimates, what is the recalculated AW for the Lloyd's protectors? Use the old first cost and maintenance cost estimates for the first 3 years, type your answer in the answer box Q3- If these estimates had been made 3 years ago, would Lloyd's still have been the economic 04- How has the capital recovery amount changed for the Lloyd's protectors with these new estimates? choice