Question: As the supervisor of a facilitites engineering department, you conside

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Question:

As the supervisor of a facilitites engineering department, you consider mobile cranes to be critical equipment. The purchase of a new medium-sized, truck-mounted crane is being evaluated. The economic estimates for the two best alternatives are shown in the table below. You have selected the longest useful life (nine years) for the study period and would lease a crane for the final three years under Alternative A. On the basis of previous experience, the estimated annual leasing cost at that time will be $66,000 per year (plus the annual expences of $28,000 per year). The MARR is 15% per year. Show that the same selection is made with

a) the PW method

b) the IRR method

c) the ERR method

d) Would leasing crane A for nine years, assuming the same costs per year as for three years, be preferred over your present selection? (MARR=15%)

For Alternative A:

Capital Investment=$272,000

Annual expenses=28,800

Usueful life (years)=6

Market value (at end of life)=$25,000

Alternative B:

Capital Investment=$346,000

Annual expenses=19,300

Usueful life (years)=9

Market value (at end of life)=$40,000

I feel pretty confident that I will be able to do the work for the PW method and the IRR method on my own, but would like to know which method you choose so that I can check mine. I need more help with problems c and d. Please show your work on the ERR method. Thank you.

Explanation / Answer

here is your answer

http://www.google.com.pk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&ved=0CDMQFjAA&url=http://web.eng.fiu.edu/leet/EIN6357AdvEngEco/HW6_Solution_ed4.doc&ei=VYJ0Uf65AsSLrQejl4DoDg&usg=AFQjCNHcMJOxdH7YZOCWiJw8ctl44ts1Kg&bvm=bv.45512109,d.bmk

http://www.google.com.pk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&ved=0CDgQFjAB&url=http://tentamens.intermate.nl/Overig/1A350 Bedrijfskunde voor Technici/1A350 Engineering Economy Voorbeeldtentamen 1.pdf&ei=VYJ0Uf65AsSLrQejl4DoDg&usg=AFQjCNFQXhmZ_nn5ryZpa9eOtPSxnKSNPg&bvm=bv.45512109,d.bmk

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