2) 3) 4) Determine how much the owner of a building would be justified to pay fo

Question

2)

3)

4)

Determine how much the owner of a building would be justified to pay for a new fire protection system which would reduce insurance premiums by S900 each year if the system will need to be replaced each 15 years and will have a salvage value equal to 20% of its initial cost. Use a MARR of 8%. Given Determine the best alternative using annual cash flow analysis. The accounting department is involved in a little wager. The accountants believe that an engineer cannot correctly determine which alternative should be chosen using equivalent uniform annual cash flow analysis. As a means of proving this statement, the accountants have provided you with the following data. The accounting department has chosen Alternative B. Calculate the equivalent uniform annual cash flow of each alternative using a MARR of 12%. State whether or not you agree with the accounting department. The following data is available for three different Alternatives B and C are replaced at the end of their useful lives with identical replacements. Using annual cash flow analysis, find the most attractive alternative.

Explanation / Answer

1 $8221.15

2 NPV

Alt a - $1508.21

alt b - -$9408.07

alt c - $36752.25

Alternative c

3

Equivalent Uniform Annual Cash flow for a = $17290.8

Equivalent Uniform Annual Cash flow for b = $26753.16

Choose alternate b

4

Equivalent Uniform Annual Cash flow for a is supposed to be too small

Equivalent Uniform Annual Cash flow for b = $36.55

Equivalent Uniform Annual Cash flow for c = $58.16

Alternate c

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