Assignment 2 2015
Assignment 2 2015
Assignment 2 2015
Q. No. 1: The manager of a canned food processing plant must decide between two
different labeling machines. Machine A will have a first cost of $42,000, an annual
operating cost of $28,000, and a service life of 4 years. Machine B will cost $51,000
to buy and will have an annual operating cost of $17,000 during its 4-year life. At an
interest rate of 10% per year, which should be selected on the basis of a present worth
analysis?
Q. No. 3: A public water utility is trying to decide between two different sizes of pipe
for a new water main. A 250-mm line will have an initial cost of $155,000, whereas a
300-mm line will cost $210,000. Since there is more head loss through the 250-mm
pipe, the pumping cost is expected to be $3000 more per year than for the 250-mm
line. If the lines a expected to last for 30 years, which size should be selected on the
basis of a present worth analysis using an interest rate of 10% per year?
Q. No. 4: Machines that have the following costs are under consideration for a
robotized welding process. Using an interest rate of 10% per year, determine which
alternative should be selected on the basis of a present worth analysis.
Machine X Machine Y
First cost, $ 250,000 430,000
Annual operating cost 60,000 40,000
Salvage value 70,000 95,000
Life, years 3 6
Q. No. 5: A project involves an initial outlay of Rs. 30,00,000 and with the following
transactions for the next five years. The salvage value at the end of the life of the
project after five years is Rs. 2,00,000. Draw a cash flow diagram of the project and
find its present worth by assuming i = 15%, compounded annually.
End of Maintenance and Revenue
year operating cost
1 2,00,000 9,00,000
2 2,50,000 10,00,000
3 3,00,000 12,00,000
4 3,00,000 13,00,000
5 4,00,000 12,00,000