19:46 e > ENGINEERING ECONOMY tents HomeworkHW 6 HOMEWORK ASSIGNMENT 6 Due Date:

Question

19:46 e > ENGINEERING ECONOMY tents HomeworkHW 6 HOMEWORK ASSIGNMENT 6 Due Date: 11/21/2017 Instructions: 1. Please write legibly and highlight your final answer. 2. Solve the problems sequentially and use a cover sheet that is provided on D2L 3. Solve the problems on engineering paper or 8 ½ x 1 1 paper with no tattered edges Problem 1 A company can purchase a needed service for $90 per unit. The same service can be provided by an equipment that costs $100,000 and will have a salvage value of S0 at the end of 10 years. Annual operating costs for the equipment will be $7,000 per year plus $25 per unit produced. MARR is 12 percent/year. Based on a present worth analysis, should the equipment be purchased if the expected demand is 500 units/ year?

Explanation / Answer

Find the annual cost in the first and second method

Annual equivalent cost (1) = 500*90 = $45000

Annual equivalent cost (2)= 100,000(A/P, 12%, 10) + 7000 + 25*500 = 100,000*0.17698 + 7000 + 25*500 = $37198

Since second method is less expensive, the equiment should be purchased.

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