Question
Case Study : THE CHANGING SCENE OF AN ANNUAL WORTH ANALYSIS Harry, owner of an automobile battery distributorship has decided to place surge protectors in-line
Case Study: THE CHANGING SCENE OF AN ANNUAL WORTH ANALYSIS
Harry, owner of an automobile battery distributorship has decided to place surge protectors in-line for all his major pieces of testing equipment. Two different manufacturers protectors need to be compared using a MARR of 15%.
Scenario 1: PowrUp and Lloyds have submitted the following economic information (See table below)
PowrUp | Lloyd's | ||
Cost and installation, $ | -26,000 | -36,000 | |
Annual maintenance cost, $ per year | -800 | -300 | |
Salvage value, $ | 2,000 | 3,000 | |
Annual repair savings, $ per year | 25,000 | 35,000 | |
Useful life, years | 6 | 10 |
Q 1a) Calculate the annual worth of the PowrUp protectors
Q 1b) What is the capital recovery amount for the PowrUp protectors?
Q 1c) Calculate the annual worth of the Lloyd protectors
Q 1d) What is the capital recovery amount for the Lloyds protectors?
Q 1e) Which manufacturers protectors should be selected by Harry using annual worth analysis
Scenario 2: Lloyds have recently revised their economic estimates which are shown in the table below.
Lloyd's (new estimates) | |||||
Initial investment | Upgrade cost | Salvage value | Annual maint. | Repair savings | |
Year | |||||
0 | -$36,000 | ||||
1 | -$300 | $35,000 | |||
2 | -$300 | $32,000 | |||
3 | -$300 | $28,000 | |||
4 | -$1,200 | $26,000 | |||
5 | -$1,320 | $24,000 | |||
6 | -$9,000 | -$1,452 | $22,000 | ||
7 | -$1,597 | $20,000 | |||
8 | -$1,757 | $18,000 | |||
9 | -$1,933 | $16,000 | |||
10 | $1,000 | -$2,126 | $14,000 |
Using these new estimates, answer the following questions:
Q 2a) What is the recalculated AW for the Lloyds protectors?
Q 2b) What is the recalculated capital recovery amount for the Lloyds protectors?
Q 2c) Which manufacturers protectors should now be selected by Harry using annual worth analysis
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