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Assignment 5

This document contains sample problems and their solutions for an engineering economy assignment involving annual worth analysis. It includes questions about comparing investment alternatives for machines, sludge dewatering processes, and road repair/resurfacing projects based on their annual worth using interest rates of 10%, 10%, and 8% respectively. The final problem asks to calculate the perpetual annual worth of an endowment fund making escalating deposits over 11 years earning 10% annual interest.

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Chalermchai New Kawin
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206 views

Assignment 5

This document contains sample problems and their solutions for an engineering economy assignment involving annual worth analysis. It includes questions about comparing investment alternatives for machines, sludge dewatering processes, and road repair/resurfacing projects based on their annual worth using interest rates of 10%, 10%, and 8% respectively. The final problem asks to calculate the perpetual annual worth of an endowment fund making escalating deposits over 11 years earning 10% annual interest.

Uploaded by

Chalermchai New Kawin
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Engineering Economy Assignment 5

255330
Chapter 6 Annual Worth Analysis
Due Date:
6.2 Machine A has a 3-year life with on salvage value. Assume that you were told
that the service provided by these machines would be needed for only 5 years.
Alternative A would have to be repurchased and kept for only 2 years. What
would its salvage value have to be after the 2 years in order to make its annual
worth the same as it is for its 3-year life cycle at an interest rate of 10% per
year? (S = $3656 )
Year Alternative A, $ Alternative B, $
0 -10,000 -20,000
1 -7,000 -5,000
2 -7,000 -5,000
3 -7,000 -5,000
4 -5,000
5 -5,000

6.4 A large textile company is trying to decide which sludge dewatering process it
should use ahead of its sludge drying operation. The costs associated with
centrifuge and belt press systems are shown below. Compare them on the
basis of their annual worths, using an interest rate of 10% per year.
(AWcentrifuge = $-83,218; AWbelt $-93,549; Select centrifuge.)

Centrifuge Belt Press


First cost, $ -250,000 -170,000
Annual operating cost, $/year -31,000 -35,000
Overhaul in year 2, $ - -26,000
Salvage value, $ 40,000 10,000
Life, years 6 4

1
6.14 A state highway department is trying to decide whether it should “hot-patch” a
short section of an existing county road or resurface it. If the hot-patch method
is used, approximately 300 cubic meters of material would be required at a cost
of $700 per cubic meter (in place). Additionally, the shoulders will have to be
improved at the same time at a cost of $24,000. These improvements will last 2
years, at which time they will have to be redone. The annual cost of routine
maintenance on the patched up road would be $5000. Alternatively, the state
can resurface the road at a cost of $850,000. This surface will last 10 years if
the road is maintained at a cost of $2000 per year beginning 3 years from now.
No matter which alternative is selected, the road will be completely rebuilt in 10
years. At an interest rate of 8% per year, which alternative should the state
select on the basis of an annual worth analysis?
(AWhot = $-136,220, AWresurface = $-128,144; Resurface the road.)
6.21 A philanthropist working to set up a permanent endowment wants to deposit
money each year, starting now and making 10 more (i.e., 11) deposits, so that
money will be available for research related to planetary colonization. If the size
of the first deposit is $1 million and each succeeding one is $100,000 larger
than the previous one, how much will be available forever beginning in year 11,
if the fund earns interest at a rate of 10% per year?
(AW = $2,606,230)

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