Alternative 1 has a capital cost of $2,069,000 and annual O&M cost of $348,000 Alternative 2...

Alternative 1 has a capital cost of $2,069,000 and annual O&M cost of $348,000

Alternative 2 has a capital cost of $7,182,000 and annual O&M cost of $394,000

Number of years = 30, interest rate = 3%

Compare the two alternatives using the present worth method AND annual cost method. Which is least costly? Are the conclusions same for each method?

Solutions

Expert Solution

Ally Wells answered 5 months ago

Next > < Previous

Related Solutions

Alternative R has a first cost of $88,000, annual M&O costs of $62,000, and a $20,000...

Alternative R has a first cost of $88,000, annual M&O costs of $62,000, and a $20,000 salvage value after 5 years. Alternative S has a first cost of $175,000 and a $58,000 salvage value after 5 years, but its annual M&O costs are not known. Determine the M&O costs for alternative S that would yield a required incremental rate of return of 23%. The M&O cost for alternative S is $

Consider these two alternatives. Alternative 1 Alternative 2 Capital investment ? $4400 ? $6400 Annual revenues...

Consider these two alternatives. Alternative 1 Alternative 2 Capital investment ? $4400 ? $6400 Annual revenues ?$1450 ?$1950 Annual expenses ?$370 ?$510 Estimated market value ?$850 ? $1250 Useful life 9 years 12 years a. Suppose that the capital investment of Alternative 1 is known with certainty. By how much would the estimate of capital investment for Alternative 2 have to vary so that the initial decision based on these data would be? reversed? The annual MARR is 18?% per...

The annual maintenance and operating (M&O) cost was estimated to be $2,500 in Year 1 through...

The annual maintenance and operating (M&O) cost was estimated to be $2,500 in Year 1 through Year 4, and $4,400 in Year 5 through Year 9. Estimate the future value of the M&O cost (at t=9) with an interest rate of 11% per year.

A machine cost $30,000 initially and has no salvage value. The O&M costs in year 1...

A machine cost $30,000 initially and has no salvage value. The O&M costs in year 1 were $10,000 and have been increasing by $2,000 from year 2. The minimum cost life of this machine for a MARR of 10 %. (show your solution) A. 4 years B. 2 years C. 6 years D. None of above

Alternative A has an initial acquisition cost of $10,000 and an annual average operating and maintenance...

Alternative A has an initial acquisition cost of $10,000 and an annual average operating and maintenance cost of $1402 per down time. Alternative B has a higher acquisition cost of $20,000, but has a lower annual average operating and maintenance cost of $500 per down time. With an expected lifetime of 5 years for both alternatives, and an annual interest of 5%, determine the break even number of down times per year. please show all work

o The initial capital cost will be $500,000 paid at the beginning of year 1 (i.e.,...

o The initial capital cost will be $500,000 paid at the beginning of year 1 (i.e., immediately). The impact on cottage owners will involve a loss of $50,000 at the end of each year for the first four years (because of the construction activities affecting property values) but cottage owners will benefit by $55,000 per year in perpetuity from the end of year 5 onwards. The benefits from recreational fishing will not start until the end of year 5 and...

Pine Village council proposes to construct new recreation fields. Construction will cost $350,000 and annual O&M...

Pine Village council proposes to construct new recreation fields. Construction will cost $350,000 and annual O&M expenses are $80,000. The city council estimates that the value of added youth leagues is about $125,000 annually. In year 6 another $90,000 will be needed to refurnish the fields. the city council agrees to transform the ownership of the fields to a private company for $150,00 at the end of year 10. a. Draw the cash flow diagram. b. If the MARR for...

1 A renewable energy electricity supply technology has the following characteristics: Capital cost ($) Annual operating cost...

1 A renewable energy electricity supply technology has the following characteristics: Capital cost ($) Annual operating cost ($) Lifetime (years) Salvage value ($) Annual electricity supplied (MWh) 380 000 29 500 25 42 000 380 If the owner can sell the electricity at 30 c/kWh, calculate the lifecycle cost of the technology over an assessment period of 25 years at a real discount rate of 5% Calculate the average unit cost of the power in present value terms (in cents/kWh) supplied...

1 A renewable energy electricity supply technology has the following characteristics: Capital cost ($) Annual operating...

1 A renewable energy electricity supply technology has the following characteristics: Capital cost ($) Annual operating cost ($) Lifetime (years) Salvage value ($) Annual electricity supplied (MWh) 300 000 27 200 25 40 000 400 If the owner can sell the electricity at 25 c/kWh, what is the simple payback period for the technology? Would the owner invest in this technology if (s)he set a strict maximum four-year payback period? What would the selling price for the electricity have to...

2. Project A will cost $100,000 and requires working capital of $20,000. Annual revenue of $21,000...

2. Project A will cost $100,000 and requires working capital of $20,000. Annual revenue of $21,000 and expenses of $5,000 for five years. In the fifth year there will be salvage value of $8,000. Should the project be accepted with a discounted rate of 14%. Annuity rate 2.91371; Single factor rate .51937.

Subjects