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Tutorial 5

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9 views2 pages

Tutorial 5

Uploaded by

sissy.he.7
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ECE 192, Spring 2023

Tutorial # 5

1) Cleanville Environmental Services is evaluating two alternative methods for the disposing
of municipal waste. The first involves developing a landfill site near the city. Costs of the
site include $1,000,000 in start-up costs, $100,000 close-down costs 30 years from now,
and operating costs of $20,000 per year. Starting in 10 years, it is expected that there will
be revenues from user fees of $30,000 per year. The alternative is to ship the waste out of
the region. An area firm will agree to a long-term contract to dispose of the waste out of
the region for $130,000 per year. Using the annual worth method, which alternative is
economically preferred for a MARR of 11 percent? Would this likely be the actual
preferred choice?

2) Data for two independent investment opportunities are shown below:

a. For a MARR of 8 percent, should either, both or neither machine be purchased? Use
the annual worth method.
b. For a MARR of 8 percent, should either, both or neither machine be purchased? Use
the present worth method.
c. What are the payback periods for these machines? Based on the payback periods,
should either, both or neither machine be purchased? The required payback period
for investment of this type is three years.

3) Charlie has a project for which he had determined a present worth of $56,740. He now has
to calculate the IRR for the project, but unfortunately, he has lost complete information
about the cash flows. He knows only that the project has a five-year service life and a first
cost of $180,000, that a set of equal cash flows occurred at the end of each year, and the
MARR used was 10 percent. What is the IRR of the project?

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ECE 192, Spring 2023

4) Sam is considering buying a new lawn mower. He has a choice between Lawn Guy mower
and a Bargain Joe´s Clip Job mower. Sam has a MARR of 5 percent. The salvage value of
each mower at the end of its service life is zero. Determine which alternative is preferable
using the IRR method.

Lawn Clip Job


Guy
First Cost $350 $120
Life 10 years 4 years
Annual Gas $60 $40
Annual Maintenance $30 $60

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