Question

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1) Certain parts for NASA’s reusable space exploration vehicle can be either anodized (A) or powder coated (P). Some of the costs for each process are shown in the table below. The incremental cash flow future worth equation associated with (P-A) is

0 = -53,000(F/P,Δi*_P−A,5) + 21,000(F/A,Δi*_P−A,5) + 8000

Please provide the answers taking sign conventions into consideration (i.e. cash inflows as positive and cash outflows as negative.) Determine the following:

a) The first cost for P

b) The M&O for A

c) The resale value of P

Process	Anodized, A	Powder coated, P
First Cost, $	-30,000	?
M&O, $/Year	?	-11,000
Resale Value, $	4,000	?
Life, Years	5	5

Answer 1

In the incremental IRR analysis we find incremental cash flows by deducting lower first cost project from higher first cost project

We are given with equation as follows,

0=-53000(F/P,Δi*P−A,5)+21000(F/A,Δi*P−A,5)+8000

Negative convention is for Cash outflow such as difference in cash flow is if negative.

-53000=First Cost of P -First Cost of A

-53000=First Cost of P-(-30000)

-53000=First Cost of P+30000

First Cost of P=-83,000 I The First Cost for P)

21000=M&O / year of P - M&O / year of A

21000=-11000-(M&O /year of A)

(M&O /year of A)=-32000 (The M&O for A)

8000=Resale Value of P-Resale Value of A

8000=Resale Value of P-4000

Resale Value of P=12000 (The Resale Value of P)

Now we can Fill the blanks
Process   Anodized (A)   Powder Coated (P)
First Cost -30000 -83000
M&O $/year -32000 -11000
Resale Value   4000 12000
Life, Years 5     5