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 (10 points)

Q 1b) What is the capital recovery amount for the PowrUp protectors? (3 points)

Q 1c) Calculate the annual worth of the Lloyd protectors (10 points)

Q 1d) What is the capital recovery amount for the Lloyds protectors? (3 points)

Q 1e) Which manufacturers protectors should be selected by Harry using annual worth analysis (4 points)

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? (36 points)

Q 2b) What is the recalculated capital recovery amount for the Lloyds protectors? (10 points)

Q 2c) Which manufacturers protectors should now be selected by Harry using annual worth analysis (4 points)

Hints

Q2a) You need to convert all ten yearly lines first to Present Worth and then back to Annual Worth. Following is a small hint:

For the initial investment of 36,000 convert it into AW using the (A/P,15%,10).

For the salvage value of 1,000 convert it into AW using the (A/F,15%,10).

For the first line convert (35,000 - 300) into PW using (P/F,15%,1) and then into AW using the (A/P,15%,10).

For the second line convert (32,000 - 300) into PW using (P/F,15%,2) and then into AW using the (A/P,15%,10).

And so on for each of the remaining 8 lines.

Q2b) For the CR only consider the following:

For the initial investment of 36,000 convert it into AW using the (A/P,15%,10).

For the salvage value of 1,000 convert it into AW using the (A/F,15%,10).

For the upgrade cost of 9,000 convert it into PW using (P/F,15%,6) and then into AW using the (A/P,15%,10).