Engineering Economic Analysis

228 RATEOF RETURNANALYSIS

7-47 Two alternatives are as follows:

Year

o

1

2

3

A

-$2000

+800

+800

+800

B

-$2800

+1100

+ 1100

+1100

If 5% is considered the minimum attractive rate of

return, which alternative should be selected?

7-48 Consider two mutually exclusive alternatives:

Year

o

1

2

3

4

X

-$100

35

35

35

35

y

-$50.0

"16.5

16.5

16.5

16.5

If the minimum attractive rate of return is 10%, which

alternative should be selected?

7-49 Consider these two mutually exclusive alternatives:

Year

o

1

2

3

4

A

-$50

17

17

17

17

B

-$53

17

17

17

17

At a MARR of 10%, which alternative should be

selected? (Answer: A)

1\\'0 mutually exclusive alternatives are being consid-

ered. Both have a 10-year useful life. If the MARR is

8%, which alternative is preferred?

7-50

Initial cost

Uniform annual benefit

A

$100.00

19.93

B

$50.00

11.93

7-51 Consider two mutually exclusive alternatives:

Year

o

1

2

3

4

X

-$5000

-3000

+4000

+4000

+4000

y

-$5000

+2000

+2000

+2000

+2000

If the MARR is 8%, which alternative should be

selected?

7-53

If the minimum attractive rate of return is 8%, which

alternative should be selected? Solve the problem by

(a)Present worth analysis "

(b) Annual cash flow analysis

(c)Rate of return analysis

A contractor is considering whether to purchase

or lease a new machine for his layout site work.

Purchasing a new machine will cost $12,000 with

a salvage value of $1200 at the end of the machine's

useful life of 8 years. On the other hand, leasing re-

quires an annual lease payment of $3000. Assuming

that the MARR is 15% and on the basis of an internal

rate of return analysis, which alternative should the

contractor be advised to accept. The cash flows are ~

follows:

Year(n)

o 1 2 3 4 5 6 7 8

Alt.A(purchase)

-$12,000

Alt.B(lease)

o

-$3000

-3000

-3000

• 3000
  -3000


• 3000
  -3000
  +1200 -3000

7-54 Two hazardous environment facilities are being eval-

uated, with the projected life of each facility being

10 years. The caSh flows are as follows:

7-52 Two mutually exclusive alternatives are being

considered.

Year A B

(^0) -$2500 -$6000
(^1) +746 + 1664
2 +746 +1664
(^3) +746 + 1664
(^4) +746 + 1664
5 +746 + 1664
Alt.A -Alt.B
First cost $615,000 $300,000
Maintenanceand 10,000 25,000
operating cost
Annual benefitS 158,000 92,000
Salvage value 65,000 -5,000