1) The Director of UTHealth plans to implement a new MRI system in the Health Sc

Question

1) The Director of UTHealth plans to implement a new MRI system in the Health Science Center at San Antonio. He is working with chief physicians to select the better of two alternatives. At 5% per year, select the more economical system AllTech Philips First cost, $ 250,000 224,000 231,000 235,000 26,000 nnual operating cost, S per year Overhaul in year 3,$ Overhaul in year 4, $ Salvage value, S Expected life, years 140,000 50,000 10,000 2) Tron Bicycle Corp. needs replacement equipment to manufacture ergonomic handlebars for its mountain bikes. Select between two machines, using the corporate MARR of 15% per year with present worth analysis and LCM Machine D Machine E First cost, $ nnual operating cost, S per year Salvage value, S Life, years -62,000 15,000 8,000 4 77,000 21,000 10,000 3) A petroleum engineer at the State Oil Company of the Azerbaijan Republic (SOCAR) wants you to perform a capitalized cost analysis for the following pipeline routing, at 10% per year Installation cost: S-225 milion Pumping, operating, security: S-20 million per year Replacement of deteriorated pipe: S-50 million every 40 years

Explanation / Answer

(1)

Since economic life is the same,w e use Present Worth (PW) criterion.

PW, AllTech ($) = - 250,000 - 231,000 x P/A(5%, 6) - 140,000 x P/F(5%, 4) + 50,000 x P/F(5%, 6)

= - 250,000 - 231,000 x 5.0757** - 140,000 x 0.8227** + 50,000 x 0.7462**

= - 250,000 - 1,172,487 - 115,178 + 37,310

= - 1,500,355

PW, Philips ($) = - 77,000 - 235,000 x P/A(5%, 6) - 26,000 x P/F(5%, 3) + 10,000 x P/F(5%, 6)

= - 77,000 - 235,000 x 5.0757** - 26,000 x 0.8638** + 10,000 x 0.7462**

= - 77,000 - 1,192,790 - 22,459 + 7,462

= - 1,284,787

Since Philips has a lower negative PW, Philips should be selected.

**From P/A and P/F Factor tables

NOTE: As per Answering Policy, 1st question has been answered.

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