Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Thank you for the help An airline is considering two types of engine systems for use in its planes. Each has the same life and

Thank you for the help

image text in transcribed
An airline is considering two types of engine systems for use in its planes. Each has the same life and the same maintenance and repair record. System A costs $100,000 and uses 40,000 gallons per 1,000 hours of operation at the average load encountered in passenger service. System B costs $240,000 and uses 29,000 gallons per 1,000 hours of operation at the same level. Both engine systems have three-year lives before any major overhaul is required. On the basis of the initial investment, the systems have 10% salvage values. If jet fuel costs $2.39 a gallon (year 1) and fuel consumption is expected to increase at the rate of 6% per year because of degrading engine efficiency, which engine system should the firm install? Assume 3,000 hours of operation per year and a MARR of 12%. Use the AE criterion. What is the equivalent operating cost per hour for each engine? Assume an end-of-year convention for the fuel cost. Single Payment Equal Payment Series Compound Present Compound Sinking Present Capital Amount Worth Amount Fund Worth Recovery Factor Factor Factor Factor Factor Factor JAUN-Z (F/P, i, N) (P/F, i, N) (F/A, i, N) (A/F, i, N) (P/A, i, N) (A/P, i, N) 1.1200 0.8929 1.0000 1.0000 0.8929 1.1200 1.2544 0.7972 2.1200 0.4717 1.6901 0.5917 1.4049 0.7118 3.3744 0.2963 2.4018 0.4163 1.5735 0.6355 4.7793 0.2092 3.0373 0.3292 1.7623 0.5674 6.3528 0. 1574 3.6048 0.2774 1.9738 0.5066 8.1152 0.1232 4.1114 0.2432 2.2107 0.4523 10.0890 0.0991 4.5638 0.2191 2.4760 0.4039 12.2997 0.0813 4.9676 0.2013 2.7731 0.3606 14.7757 0.0677 5.3282 0.1877 3.1058 0.3220 17.5487 0.0570 5.6502 0.1770 The equivalent annual costs for system A are $ (Round to the nearest dollar.) The equivalent annual costs for system B are $ (Round to the nearest dollar.) The equivalent operating cost per hour for process A is $ . (Round to the nearest cent.) The equivalent operating cost per hour for process B is $ (Round to the nearest cent.) Which engine system should be selected? Choose the correct answer below. O System A System B

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Global Capitalism Its Fall And Rise In The Twentieth Century

Authors: Jeffry Frieden

1st Edition

039332981X, 9780393329810

More Books

Students also viewed these Economics questions