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Economics

CASE STUDY ANNUAL WORTH ANALYSIS-THEN AND NOW Background and Information Mohamad, owner of an residential furnished apartment's in Dubai, performed an economic analysis 4 years ago when he decided to place an new eefficient central AC unit for each apartments instead of old split units windows type in each room. The estimates used and the annual worth analysis at MARR = 12% are summarized below. Two different AC brands were compared. LG York Cost and installation, $ -26,000-30,000 Annual maintenance cost, $ per year -800-300 Salvage value, $ 2,000 3,000 Electrical power savings, $ per year 25,000 35,000 Useful life, years 7 10 The spreadsheet in below sheet is the one Mohamad used to make the decision. York was the clear choice due to its substantially larger AW value, hence York AC units were installed. MARR 12% LG York Investment Annual Repair Investment Annual Repair Years and salvage maintenance savings and salvage maintenance savings $0 So -$30,000 $0 SO -$800 $25,000 $0 $300 $35,000 -$800 $25,000 $0 -$300 $35,000 -$800 $25,000 $0 -$300 $35,000 -$800 $25,000 $0 $300 $35,000 $800 $25,000 so -$300 $35,000 -$800 $25,000 $O $300 $35,000 -$800 $25,000 so $300 $35,000 so -$300 $35,000 SO $300 $35,000 $3,000 $300 $35,000 0-$26,000 150 2 $0 3 $0 $0 550 650 7$2,000 8 9 10 Mohamad, owner of an residential furnished apartment's in Dubai, performed an economic analysis 4 years ago when he decided to place an new eefficient central AC unit for each apartments instead of old split units windows type in each room. The estimates used and the annual worth analysis at MARR = 12% are summarized below. Two different AC brands were compared. Cost and installation, $ LG York -26,000-30,000 -300 Annual maintenance cost, $ per year -800 Salvage value, $ Electrical power savings, $ per year 25,000 Useful life, years 2,000 3,000 35,000 7 10 The spreadsheet in below sheet is the one Mohamad used to make the decision. York was the clear choice due to its substantially larger AW value, hence York AC units were installed. MARR 12% LG York Investment Annual Annual Repair Investment and salvage Years and salvage Repair savings $0 maintenance maintenance savings $0 -$30,000 $0 $0 -$800 $25,000 $0 -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $800 $25,000 $0 -$300 $35,000 -$800 $25,000 $0 -$300 $35,000 -$800 $25,000 $0 $300 $35,000 -$800 $25,000 $0 $300 $35,000 $0 -$300 $35,000 SO -$300 $35,000 $3,000 -$300 $35,000 -$800 $25,000 -$5,139 -$300 $35,000 $18,701.17 AW element Total AW 0-$26,000 150 2 $0 350 4 $0 5$0 650 7 $2,000 8 9 10 $5,499 $29,561.43 990 9000 130 $300 450 $800 so $300 5 $0 -$800 so -$300 650 -$800 $0 $300 7$2,000 $800 $0 $300 8 so $300 9 SO $300 10 $3,000 -$300 AW element $5,499 $800 $5,139 -$300 Total AW $18,701.17 $29,561.43 During a quick review (year 4 of operation), it was obvious that the maintenance costs and repair savings have not followed (and will not follow) the estimates made 4 years ago. In fact, the maintenance contract cost is going from $300 this year (year 4) to $1200 per year next year and will then increase 9% per year for the next 6 years. Also, the electrical power savings for the last 4 years were $31,312 (year 1). $27.565 (year 2), $30,493( year3), and $32,903( year4), as best as Mohamad can determine. He believes savings will decrease by $1,500 per year hereafter. Finally, these 4-year-old AC units are worth nothing on the market now, so the salvage is zero, not $3000. Q1-With these new estimates, What is the AW of the Investment and Salvage value for YORK AC unit? Q2-With these new estimates, What is the FW of the Investment and Salvage value for YORK AC unit? Q3 - With these new estimates, what is the recalculated AW maintenance cost for the YORK AC units? Q4 - With these new estimates, what is the recalculated PW maintenance cost for the YORK AC units? Q5 - With these new estimates, what is the recalculated Total AW for YORK AC units. Q6-With these new estimates, what is the recalculated Total FW for YORK AC units. Q7 - With these new estimates, what is the recalculated Total PW for YORK AC units. Q8-If these estimates had been made 4 years ago, would YORK still have been the economic choice, why explain your answer Q9 - What is difference in capital recovery amount for the YORK units with these new estimates? Q10 - If MARR is changed to 8% for the upcoming 6 years what will be the Total PW for the YORK units? 1920,000 $25,000 $25,000 $25,000 $25,000 $25,000 1930,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 QUESTION'T CASE STUDY ANNUAL WORTH ANALYSIS-THEN AND NOW Background and Information Mohamad, owner of an residential furnished apartment's in Dubai, performed an economic analysis 4 years ago when he decided to place an new eefficient central AC unit for each apartments instead of old split units windows type in each room. The estimates used and the annual worth analysis at MARR = 12% are summarized below. Two different AC brands were compared. LG York Cost and installation, $ -26,000-30,000 -800 -300 Annual maintenance cost, $ per year Salvage value, $ 2,000 3,000 Electrical power savings, $ per year 25,000 Useful life, years 35,000 7 10 The spreadsheet in below sheet is the one Mohamad used to make the decision. York was the clear choice due to its substantially larger AW value, hence York AC units were installed. MARR 12% LG York Investment Annual Repair Investment Annual Repair Years savings and salvage maintenance savings and salvage maintenance 30 0-$26,000 $0 -$30,000 so so 150 -$800 $25,000 $0 $300 $35,000 250 -$800 $25,000 $0 $300 $35,000 350 $800 $25,000 50 $300 $35,000 450 $800 $25,000 $0 $300 $35,000 5:30 $800 $25,000 $0 -$300 $35.000 650 $800 $25,000 $0 -$300 $35,000 7 $2.000 $800 $25,000 $0 $300 $35,000 The spreadsheet in below sheet is the one Mohamad used to make the decision. York was the clear choice due to its substantially larger AW value, hence York AC units were installed. MARR 12% LG York Investment Annual Repair Annual maintenance Years and salvage Repair savings SO Investment and salvage $30,000 maintenance savings so $0 $0 $800 $25,000 SO -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $800 $25,000 SO -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $0 -$300 $35,000 so -$300 $35,000 $3,000 $300 $35,000 $5,499 $800 $25,000 $5,139 $300 $35,000 AW element Total AW $18,701.17 $29,561.43 During a quick review (year 4 of operation), it was obvious that the maintenance costs and repair savings have not followed (and will not follow) the estimates made 4 years ago. In fact, the maintenance contract cost is going from $300 this year (year 4) to $1200 per year next year and will then increase 9% per year for the next 6 years. Also, the electrical power savings for the last 4 years were $31,312 (year 1). $27,565 (year 2), $30,493( year3), and $32,903( year4), as best as Mohamad can determine. He believes savings will decrease by $1,500 per year hereafter. Finally, these 4-year-old AC units are worth nothing on the market now so the salvana is zo al canon 0-$26,000 150 2 50 3:30 450 530 650 7 $2,000 8 9 10 A Question Completion Status: 7 $2,000 -$800 $25,000 SO $300 8 so -$300 9 $0 -$300 10 $3,000 -$300 AW element $5,499 $800 -$300 $25,000 -$5,139 $18,701.17 Total AW $29,561.43 During a quick review (year 4 of operation), it was obvious that the maintenance costs and repair savings have not followed (and will not follow) the estimates made 4 years ago. In fact, the maintenance contract cost is going from $300 this year (year 4) to $1200 per year next year and will then increase 9% per year for the next 6 years. Also, the electrical power savings for the last 4 years were $31,312 (year 1). $27,565 (year 2), $30,493( year3), and $32,903( year4), as best as Mohamad can determine. He believes savings will decrease by $1,500 per year hereafter. Finally, these 4-year-old AC units are worth nothing on the market now, so the salvage is zero, not $3000. Q1 - With these new estimates, What is the AW of the Investment and Salvage value for YORK AC unit? Q2 - With these new estimates, What is the FW of the Investment and Salvage value for YORK AC unit? Q3 - With these new estimates, what is the recalculated AW maintenance cost for the YORK AC units? Q4 - With these new estimates, what is the recalculated PW maintenance cost for the YORK AC units? Q5 - With these new estimates, what is the recalculated Total AW for YORK AC units. Q6 - With these new estimates, what is the recalculated Total FW for YORK AC units. Q7-With these new estimates, what is the recalculated Total PW for YORK AC units. Q8-If these estimates had been made 4 years ago, would YORK still have been the economic choice, why explain your answer Q9-What is difference in capital recovery amount for the YORK units with these new estimates? Q10 - If MARR is changed to 8% for the upcoming 6 years what will be the Total PW for the YORK units? $35,000 $35,000 $35,000 $35,000 $35,000 CASE STUDY ANNUAL WORTH ANALYSIS-THEN AND NOW Background and Information Mohamad, owner of an residential furnished apartment's in Dubai, performed an economic analysis 4 years ago when he decided to place an new eefficient central AC unit for each apartments instead of old split units windows type in each room. The estimates used and the annual worth analysis at MARR = 12% are summarized below. Two different AC brands were compared. LG York Cost and installation, $ -26,000-30,000 Annual maintenance cost, $ per year -800-300 Salvage value, $ 2,000 3,000 Electrical power savings, $ per year 25,000 35,000 Useful life, years 7 10 The spreadsheet in below sheet is the one Mohamad used to make the decision. York was the clear choice due to its substantially larger AW value, hence York AC units were installed. MARR 12% LG York Investment Annual Repair Investment Annual Repair Years and salvage maintenance savings and salvage maintenance savings $0 So -$30,000 $0 SO -$800 $25,000 $0 $300 $35,000 -$800 $25,000 $0 -$300 $35,000 -$800 $25,000 $0 -$300 $35,000 -$800 $25,000 $0 $300 $35,000 $800 $25,000 so -$300 $35,000 -$800 $25,000 $O $300 $35,000 -$800 $25,000 so $300 $35,000 so -$300 $35,000 SO $300 $35,000 $3,000 $300 $35,000 0-$26,000 150 2 $0 3 $0 $0 550 650 7$2,000 8 9 10 Mohamad, owner of an residential furnished apartment's in Dubai, performed an economic analysis 4 years ago when he decided to place an new eefficient central AC unit for each apartments instead of old split units windows type in each room. The estimates used and the annual worth analysis at MARR = 12% are summarized below. Two different AC brands were compared. Cost and installation, $ LG York -26,000-30,000 -300 Annual maintenance cost, $ per year -800 Salvage value, $ Electrical power savings, $ per year 25,000 Useful life, years 2,000 3,000 35,000 7 10 The spreadsheet in below sheet is the one Mohamad used to make the decision. York was the clear choice due to its substantially larger AW value, hence York AC units were installed. MARR 12% LG York Investment Annual Annual Repair Investment and salvage Years and salvage Repair savings $0 maintenance maintenance savings $0 -$30,000 $0 $0 -$800 $25,000 $0 -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $800 $25,000 $0 -$300 $35,000 -$800 $25,000 $0 -$300 $35,000 -$800 $25,000 $0 $300 $35,000 -$800 $25,000 $0 $300 $35,000 $0 -$300 $35,000 SO -$300 $35,000 $3,000 -$300 $35,000 -$800 $25,000 -$5,139 -$300 $35,000 $18,701.17 AW element Total AW 0-$26,000 150 2 $0 350 4 $0 5$0 650 7 $2,000 8 9 10 $5,499 $29,561.43 990 9000 130 $300 450 $800 so $300 5 $0 -$800 so -$300 650 -$800 $0 $300 7$2,000 $800 $0 $300 8 so $300 9 SO $300 10 $3,000 -$300 AW element $5,499 $800 $5,139 -$300 Total AW $18,701.17 $29,561.43 During a quick review (year 4 of operation), it was obvious that the maintenance costs and repair savings have not followed (and will not follow) the estimates made 4 years ago. In fact, the maintenance contract cost is going from $300 this year (year 4) to $1200 per year next year and will then increase 9% per year for the next 6 years. Also, the electrical power savings for the last 4 years were $31,312 (year 1). $27.565 (year 2), $30,493( year3), and $32,903( year4), as best as Mohamad can determine. He believes savings will decrease by $1,500 per year hereafter. Finally, these 4-year-old AC units are worth nothing on the market now, so the salvage is zero, not $3000. Q1-With these new estimates, What is the AW of the Investment and Salvage value for YORK AC unit? Q2-With these new estimates, What is the FW of the Investment and Salvage value for YORK AC unit? Q3 - With these new estimates, what is the recalculated AW maintenance cost for the YORK AC units? Q4 - With these new estimates, what is the recalculated PW maintenance cost for the YORK AC units? Q5 - With these new estimates, what is the recalculated Total AW for YORK AC units. Q6-With these new estimates, what is the recalculated Total FW for YORK AC units. Q7 - With these new estimates, what is the recalculated Total PW for YORK AC units. Q8-If these estimates had been made 4 years ago, would YORK still have been the economic choice, why explain your answer Q9 - What is difference in capital recovery amount for the YORK units with these new estimates? Q10 - If MARR is changed to 8% for the upcoming 6 years what will be the Total PW for the YORK units? 1920,000 $25,000 $25,000 $25,000 $25,000 $25,000 1930,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 QUESTION'T CASE STUDY ANNUAL WORTH ANALYSIS-THEN AND NOW Background and Information Mohamad, owner of an residential furnished apartment's in Dubai, performed an economic analysis 4 years ago when he decided to place an new eefficient central AC unit for each apartments instead of old split units windows type in each room. The estimates used and the annual worth analysis at MARR = 12% are summarized below. Two different AC brands were compared. LG York Cost and installation, $ -26,000-30,000 -800 -300 Annual maintenance cost, $ per year Salvage value, $ 2,000 3,000 Electrical power savings, $ per year 25,000 Useful life, years 35,000 7 10 The spreadsheet in below sheet is the one Mohamad used to make the decision. York was the clear choice due to its substantially larger AW value, hence York AC units were installed. MARR 12% LG York Investment Annual Repair Investment Annual Repair Years savings and salvage maintenance savings and salvage maintenance 30 0-$26,000 $0 -$30,000 so so 150 -$800 $25,000 $0 $300 $35,000 250 -$800 $25,000 $0 $300 $35,000 350 $800 $25,000 50 $300 $35,000 450 $800 $25,000 $0 $300 $35,000 5:30 $800 $25,000 $0 -$300 $35.000 650 $800 $25,000 $0 -$300 $35,000 7 $2.000 $800 $25,000 $0 $300 $35,000 The spreadsheet in below sheet is the one Mohamad used to make the decision. York was the clear choice due to its substantially larger AW value, hence York AC units were installed. MARR 12% LG York Investment Annual Repair Annual maintenance Years and salvage Repair savings SO Investment and salvage $30,000 maintenance savings so $0 $0 $800 $25,000 SO -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $800 $25,000 SO -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $800 $25,000 $0 -$300 $35,000 $0 -$300 $35,000 so -$300 $35,000 $3,000 $300 $35,000 $5,499 $800 $25,000 $5,139 $300 $35,000 AW element Total AW $18,701.17 $29,561.43 During a quick review (year 4 of operation), it was obvious that the maintenance costs and repair savings have not followed (and will not follow) the estimates made 4 years ago. In fact, the maintenance contract cost is going from $300 this year (year 4) to $1200 per year next year and will then increase 9% per year for the next 6 years. Also, the electrical power savings for the last 4 years were $31,312 (year 1). $27,565 (year 2), $30,493( year3), and $32,903( year4), as best as Mohamad can determine. He believes savings will decrease by $1,500 per year hereafter. Finally, these 4-year-old AC units are worth nothing on the market now so the salvana is zo al canon 0-$26,000 150 2 50 3:30 450 530 650 7 $2,000 8 9 10 A Question Completion Status: 7 $2,000 -$800 $25,000 SO $300 8 so -$300 9 $0 -$300 10 $3,000 -$300 AW element $5,499 $800 -$300 $25,000 -$5,139 $18,701.17 Total AW $29,561.43 During a quick review (year 4 of operation), it was obvious that the maintenance costs and repair savings have not followed (and will not follow) the estimates made 4 years ago. In fact, the maintenance contract cost is going from $300 this year (year 4) to $1200 per year next year and will then increase 9% per year for the next 6 years. Also, the electrical power savings for the last 4 years were $31,312 (year 1). $27,565 (year 2), $30,493( year3), and $32,903( year4), as best as Mohamad can determine. He believes savings will decrease by $1,500 per year hereafter. Finally, these 4-year-old AC units are worth nothing on the market now, so the salvage is zero, not $3000. Q1 - With these new estimates, What is the AW of the Investment and Salvage value for YORK AC unit? Q2 - With these new estimates, What is the FW of the Investment and Salvage value for YORK AC unit? Q3 - With these new estimates, what is the recalculated AW maintenance cost for the YORK AC units? Q4 - With these new estimates, what is the recalculated PW maintenance cost for the YORK AC units? Q5 - With these new estimates, what is the recalculated Total AW for YORK AC units. Q6 - With these new estimates, what is the recalculated Total FW for YORK AC units. Q7-With these new estimates, what is the recalculated Total PW for YORK AC units. Q8-If these estimates had been made 4 years ago, would YORK still have been the economic choice, why explain your answer Q9-What is difference in capital recovery amount for the YORK units with these new estimates? Q10 - If MARR is changed to 8% for the upcoming 6 years what will be the Total PW for the YORK units? $35,000 $35,000 $35,000 $35,000 $35,000