Question: Because of a chronic water shortage in

> Equipment maintenance costs for manufacturing explosion-proof pressure switches are projected to be $125,000 in year 1 and increase by 3% each year through year 5. What is the equivalent annual worth of the maintenance costs at an interest rate of 10% pe

> It is anticipated that the needs for UPW (ultrapure water) at the new Angular Enterprises site will continue for a long time, as much as 50 years. This is the rationale for using capitalized cost as a basis for the economic decision between desalinated s

> Compare three alternatives on the basis of their capitalized costs at i = 10% per year.

> A medium-size municipality plans to develop a software system to assist in project selection during the next 10 years. A life-cycle cost approach has been used to categorize costs into development, programming, operating, and support costs for each alter

> For the cash flows shown, determine the equivalent uniform annual worth in years 1 through 5 at an interest rate of 18% per year, compounded monthly.

> The cost associated with maintaining rural highways follows a predictable pattern. There are usually no costs for the first 3 years, but thereafter maintenance is required for restriping, weed control, light replacement, shoulder repairs, etc. For one se

> A company that makes modular bevel gear drives with a tight swing ratio for optimizing fork-lift vehicles was told that the interest rate on a loan would be an effective 3.5% per quarter, compounded monthly. The owner, confused by the terminology, asked

> An international textile company’s North America Division must decide which type of fabric cutting machines it will use—straight knife or round knife. The estimates are summarized below. Compare them on the basis of an

> A consulting engineering firm is considering two models of SUVs for the company principals. A GM model will have a first cost of $36,000, an operating cost of $4000, and a salvage value of $15,000 after 3 years. A Ford model will have a first cost of $32

> Two methods can be used for producing solar panels for electric power generation. Method 1 will have an initial cost of $550,000, an AOC of $160,000 per year, and $125,000 salvage value after its 3-year life. Method 2 will cost $830,000 with an AOC of $1

> Polymer Molding, Inc. is considering two processes for manufacturing storm drains. Plan A involves conventional injection molding that will require making a steel mold at a cost of $2 million. The cost for inspecting, maintaining, and cleaning the molds

> Airodyne Wind, Inc. has wind tunnels that can operate vertically or horizontally for evaluating the effects of air flow on a component’s PCB response and reliability. The company expects to build a new tunnel that will be outfitted with multiple sensor p

> The Toro Company is expanding its El Paso, Texas plastic molding plant as it continues to transfer work from Juarez, Mexico contractors. The plant bought a $1.1 million precision injection molding machine to make plastic parts for Toro lawn mowers, trimm

> U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless steel round bars that is expected to cost $13 million now and another $10 million 1 year from now. If total operating costs will

> After you have conducted a future worth comparison of alternatives, what do you multiply the FW values by in order to obtain the AW values of the alternatives?

> Environmental recovery company Rex Chem Partners plans to finance a site reclamation project that will require a 4-year cleanup period. If the company borrows $4.1 million now, how much will the company have to get at the end of each year in order to ear

> In order to provide drinking water as part of its 50-year plan, a west coast city is considering constructing a pipeline for importing water from a nearby community that has a plentiful supply of brackish ground water. A full-sized pipeline can be constr

> One of two methods must be used to produce expansion anchors. Method A costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000 per year. Method B will have a first cost of $120,000,

> You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of

> What is meant by the term equal service alternative?

> When evaluating projects by the present worth method, how do you know which one(s) to select if the proposals are (a) independent, and (b) mutually exclusive?

> A rapidly growing city is dedicated to neighborhood integrity. However, increasing traffic and speed on a through street are of concern to residents. The city manager has proposed five independent traffic calming options: 1. Stop sign at corner A 2. Stop

> Beaver, a city in the United States, is attempting to attract a professional soccer team. Beaver is planning to build a new stadium that will cost $250 million. Annual upkeep is expected to amount to $800,000. The turf will have to be replaced every 10 y

> An aggressive stockbroker claims an ability to consistently earn 12% per year on an investor’s money. A client invests $10,000 now, $30,000 three years from now, and $8000 per year for 5 years starting 4 years from now. (a) How much money can the client

> Assume that 25 years ago your dad invested $200,000, plus $25,000 in years 2 through 5, and $40,000 per year from year 6 on ward. At a very good interest rate of 12% per year, determine (a) the CC value, and (b) the annual retirement amount that he can w

> How much money was deposited 35 years ago at 10% per year interest if it is sufficient to provide a perpetual income of $10,000 per year beginning now, year 35?

> Blue Whale Moving and Storage recently purchased a warehouse building in Santiago. The manager has two good options for moving pallets of stored goods in and around the facility. Alternative 1 includes a 4000-pound capacity, electric forklift (P = $−30,0

> What is the present worth difference between an investment of $10,000 per year for 50 years and an investment of $10,000 per year forever at an interest rate of 10% per year?

> The Golden Gate bridge is maintained by 38 painters and 17 ironworkers (who replace corroding steel and rivets). If the painters get an average wage of $120,000 per year (with benefits) and the ironworkers get $150,000 per year, what is the capitalized

> A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the “shell” will cost $150,000 and is expected to have a $65,000 salvage value after 6 years. Alternatively, the company can lease a

> Define the term capitalized cost and give a real world example of something that might be analyzed using a capitalized cost evaluation technique.

> The Department of Energy is proposing new rules mandating either a 20% increase or a 35% increase in clothes washer efficiency in 3 years. The 20% increase is expected to add $100 to the current price of a washer, while the 35% increase will add $240 to

> A remotely located air sampling station can be powered by solar cells or by running an electric line to the site and using conventional power. Solar cells will cost $12,600 to install and will have a useful life of 4 years with no salvage value. Annual c

> You and your partner have become very interested in cross-country motorcycle racing and wish to purchase entry-level equipment. You have identified two alternative sets of equipment and gear. Package K has a first cost of $160,000, an operating cost of

> Compare the alternatives C and D on the basis of a present worth analysis using an interest rate of 10% per year and a study period of 10 years.

> (a) What is the difference between a service alternative and revenue alternative? (b) What is another name of a service alternative?

> NASA is considering two materials for use in a space vehicle tracking station in Australia. The estimates are shown below. Which should be selected on an economic basis of present worth values at an interest rate of 10% per year?

> An electric switch manufacturing company is trying to decide between three different assembly methods. Method A has an estimated first cost of $40,000, an annual operating cost (AOC) of $9000, and a service life of 2 years. Method B will cost $80,000 to

> Dexcon Technologies, Inc. is evaluating two alternatives to produce its new plastic filament with tribological (i.e., low friction) properties for creating custom bearings for 3-D printers. The estimates associated with each alternative are shown below.

> Two methods can be used to produce expansion anchors. Method A costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000 in year 1, increasing by $4000 each year. Method B will have a

> The Owner of Blue Bayou Café usually pays his appliance (refrigerators, dish washers, and freezers) maintenance contract by the year. If he projects the annual costs shown, find the equivalent A value for years 1 through 5.

> For the cash flows shown, determine the future worth in year 5.

> Oil from a specific type of marine microalgae can be converted into biodiesel that may serve as an alternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae, the construction cost is $13 million and the M&O cost i

> Brady and Sons uses accounts receivable as collateral to borrow money for operations and payroll when revenues are low. If the company borrows $300,000 now at an interest rate of 12% per year, compounded monthly, and the rate increases to 15% per year, c

> How much money can a production company that makes fluidized bed scrubbers spend now instead of spending $150,000 in year 5 if the interest rates are estimated to be 10% per year in years 1 to 3 and 12% per year in years 4 and 5?

> A very optimistic hedge fund investor expects his single-deposit investment to triple in value in 5 years. (a) What is the required effective monthly rate, compounded continuously? (b) What is the corresponding effective annual rate needed?

> How long will it take for a lump-sum investment to double in value at an interest rate of 1.5% per month, compounded continuously? Solve by (a) formula and (b) spreadsheet function.

> A Texas chemical company had to file for bankruptcy because of a nationwide phaseout of methyl tertiary butyl ether (MTBE). The company is in the planning phase of reorganizing and expects to invest $50 million in a new ethanol production facility. Deter

> An environmental engineer wants to evaluate three different methods for disposing of a non-hazardous chemical waste: land application, fluidized-bed incineration, and private disposal contract. Use the estimates below to help him determine which has the

> Corrosion problems and manufacturing defects rendered a gasoline pipeline between El Paso, TX, and Phoenix, AZ, subject to longitudinal weld seam failures. The pressure was reduced to 80% of the design value. If the reduced pressure resulted in delivery

> What nominal rate per quarter is equivalent to an effective rate of 12.7% per year, compounded continuously?

> What effective interest rate per 6 months is equal to a nominal 2% per month, compounded continuously?

> What effective interest rate per year, compounded continuously, is equivalent to a nominal rate of 10% per year? Solve by formula and spreadsheet function.

> An engineer deposited her annual bonus of $10,000 into an account that pays interest at 8% per year, compounded semiannually. If she withdrew $1000 in months 2, 11, and 23, what was the total value of the account at the end of 3 years? Assume no interper

> Western Refining purchased a model MTVS peristaltic pump for injecting antiscalant at its nanofiltration water conditioning plant. The cost of the pump was $1200. If the chemical cost is $11 per day, determine the equivalent cost per month (pump plus che

> How much would your parents have to deposit each month into an account that grows at a rate of 12% per year, compounded semiannually, if they want to have $80,000 at the end of year 3 to cover part of your college expenses? Assume no interperiod compound

> Income from recycling the paper and cardboard generated in an office building has averaged $3000 per month for the past 3 years. What is the income stream’s equivalent worth now at an interest rate of 8% per year, compounded quarterly?

> Beginning 1 month from now, Thaxton Mechanical Products will set aside $1500 per month for possibly replacing its corrosion-resistant diaphragm pumps whenever it becomes necessary. The replacement isn’t needed for 3 years. How much will the company have

> Parker Hannifin of Cleveland, Ohio manufactures CNG fuel dispensers. It needs replacement equipment to streamline one of its production lines for a new contract, but plans to sell the equipment at or before its expected life is reached at an estimated ma

> In an effort to save money for early retirement, an environmental engineering colleague plans to deposit $1200 per month, starting 1 month from now, into a fixed rate account that pays 8% per year, compounded semiannually. How much will be in the account

> A software package created by Navarro & Associates can be used for analyzing and designing three-sided guyed towers and three- and four-sided self-supporting towers. A single-user license will cost $4000 per year. A site license has a one-time cost of $1

> Leonard, a company that manufactures explosion proof motors, is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $900,000 now and $560,000 two years from now, with annual M&O costs of

> Frontier Airlines hedged the cost of jet fuel by purchasing options that allowed the airline to buy fuel at a fixed price for 2 years. The savings in fuel costs were $140,000 in month 1, $141,400 in month 2, and amounts increasing by 1% per month through

> Fieldsaver Technologies, a manufacturer of precision laboratory equipment, borrowed $2 million to renovate one of its testing labs. The loan was repaid in 2 years through quarterly payments that increased by $50,000 each time. At an interest rate of 12%

> Metalfab Pump and Filter, Inc. estimates that the cost of steel bodies for pressure valves will increase by $2 every 3 months. If the cost for the first quarter is expected to be $80, what is the present worth of the costs for a 3-year time period at an

> McMillan Company manufactures electronic flow sensors that are designed as an alternative to balland- tube rotometers. The company recently spent $3 million to increase the capacity of an existing production line. If the extra revenue generated by the ex

> Thermal Systems, a company that specializes in odor control for wastewater treatment plants, made deposits of $100,000 now and $25,000 every 6 months for 2 years. Determine the future worth after 2 years of the deposits for i = 16% per year, compounded q

> Assume you are considering the consolidation of all your electronic services with one company. By purchasing a digital phone from AT&T wireless, you can buy wireless e-mail and fax services for $6.99 per month. For $14.99 per month, you will get unlimite

> In 2016, Google rented 1000 acres of a historic California airbase in the San Francisco Bay Area for $1.16 billion via a 60-year lease. Annual M&O is expected to be $6.3 million. In addition, Google will refurbish three hangars at a cost of $2.6 million

> How much must you deposit each year into your retirement account starting now and continuing through year 9, if you want to be able to withdraw $80,000 per year forever, beginning 30 years from now? Assume the account earns interest at (a) the generous r

> White Oaks Properties builds strip shopping centers and small malls. The company plans to replace its refrigeration, cooking, and HVAC equipment with newer models in one entire center built 9 years ago. The original purchase price of the equipment was $6

> As discussed in Section 6.2, either of the following two equations can be applied to determine the amount necessary to recover invested capital and a required return: CR1 = −P(A∕P,i,n) + S(A∕F,i,n) or CR2 = −[(P – S)(A/P,i,n) + S(i)] For an alternative

> A manufacturing software engineer at a major aerospace corporation has been assigned the management responsibility of a project to design, build, test, and implement AREMSS, a new-generation automated scheduling system for routine and expedited maintenan

> An international aerospace contractor has been asked by a municipal police department to estimate and analyze the life cycle costs for a proposed drone surveillance system to monitor traffic patterns and congestion within the central thoroughfares of the

> ABC Beverage, LLC purchases its 355-ml cans in large bulk from Wald-China Can Corporation. The finish on the anodized aluminum surface is produced by mechanical finishing technologies called brushing or bead blasting. Engineers at Wald are switching to m

> Harmony Auto Group sells and services imported and domestic cars. The owner wants to evaluate the option of outsourcing all of its new auto warranty service work to Winslow, Inc., a private repair service that works on any make and year car. Either a 5-y

> Determine the difference in annual worth between an investment of $100,000 per year for 50 years and an investment of $100,000 per year forever at an interest rate of (a) 5% and (b) 10% per year. Compare the two differences.

> Cisco, Inc. has a proposal from the Engineering Planning Division to invest some of the Cisco retained earnings in the design, testing, and development of the next generation of smart grids useful in the Internet of Things (IoT) environment. The initial

> The State of Chiapas, Mexico, decided to fund a program for improving reading skills in elementary school students. The first cost is $300,000 now, and an update amount of $100,000 every 5 years forever. Determine the perpetual equivalent annual cost at

> Calculate the perpetual equivalent annual cost (years 1 to ∞) of $1,000,000 now and $1,000,000 three years from now at an interest rate of 10% per year.

> Water for Semiconductor Manufacturing Case Throughout the present worth analyses, the decision between seawater and groundwater switched multiple times in Examples 5.2 and 5.4. A summary is given here in $1 million monetary units. The confusion about the

> A chemical engineer is considering two sizes of pipes for moving distillate from a refinery to the tank farm. A small pipeline will cost less to purchase (including valves and other appurtenances), but will have a high head loss and, therefore, a higher

> Two mutually exclusive alternatives have the estimates shown below. Use annual worth analysis to determine which should be selected at an interest rate of 10% per year.

> Accurate air flow measurement requires straight, unobstructed pipe for a minimum of 10 diameters upstream and 5 diameters downstream of the measuring device. In one particular application, physical constraints compromised the pipe layout, so the engineer

> Assume an alternative has a 3-year life and that you calculated its AW value over its 3-year life cycle. If you were asked to provide the AW value of the alternative for a 4-year study period, is the AW value you calculated for the alternative’s 3-year l

> Two types of robots (Cartesian and Articulated) with the following estimates are under consideration for a dishwasher assembly process. Using an interest rate of 10% per year, determine which one should be selected on the basis of an annual worth analysi

> The initial cost of a packed-bed degassing reactor for removing trihalomethanes from potable water is $84,000. The annual operating cost for power, site maintenance, etc. is $13,000. If the salvage value of the pumps, blowers, and control systems is expe

> The AW values of three cost alternatives are $−23,000 for alternative A, $−21,600 for B, and $−27,300 for C. On the basis of these results, the decision is to: (a) select alternative A (b) select alternative B (c) select alternative C (d) select the Do

> If you have the capitalized cost of a certain alternative that has a 5-year life, you can get its annual worth by: (a) multiplying the CC by i (b) multiplying the CC by (A∕F,i,5) (c) multiplying the CC by (P∕A,i,5) (d) multiplying the CC by (A∕P,i,5)

> The annual worth of alternative Y is closest to: (a) $−50,000 (b) $−76,625 (c) $−90,000 (d) $−92,000

> The annual worth of perpetual service for alternative X is represented by the following equation: (a) −200,000(0.10) − 60,000 + 20,000(0.10) (b) −200,000(A∕P,10%,5) âˆ&#14

> Three different plans were presented to the GAO (General Accounting Office) by a high-tech facilities manager for operating a portable cyber-security facility. Plan A: Renewable 1-year contracts with payments of $1 million at the beginning of each year.

> In comparing the alternatives by the annual worth method, the AW of X is determined by the following equation: (a) −200,000(0.10)−60,000+20,000(0.10) (b) −200,000(A∕P,10%,5)â&

> The estimates for two alternatives are to be compared on the basis of their perpetual equivalent annual worth. At an interest rate of 10% per year, the equation that represents the perpetual AW of Y1 is: (a) AWY1 = −90,000(0.10) â

> To get the AW of a cash flow of $10,000 that occurs every 10 years forever, with the first one occurring now, it is correct to: (a) multiply the $10,000 by (A∕P,i,10 ) (b) multiply the $10,000 by (A∕F,i,10 ) (c) multiply the $10,000 by i (d) multiply the

> You will make equal deposits into your retirement account each year for 10 years starting now (i.e., years 0–9). If you expect to withdraw $50,000 per year forever beginning 30 years from now, and the funds will earn interest at 10% per year, the size of

> An alumnus of West Virginia University wishes to start an endowment that will provide scholarship money of $40,000 per year beginning in year 5 and continuing indefinitely. The donor plans to give money now and for each of the next 2 years. If the size o

> The annual worth for years 1 through infinity of $50,000 now, $10,000 per year in years 1 through 15, and $20,000 per year in years 16 through infinity at 10% per year is closest to: (a) less than $16,900 (b) $16,958 (c) $17,395 (d) $19,575

> If you wish to accumulate $10,000 over a 5-year period by placing $200 a month, starting next month, into a Roth IRA retirement fund that pays 6% per year, compounded quarterly with no interperiod compounding, the NPER function to determine the number of

> A midcareer engineer hopes to have $2 million available for his use when he retires 20 years from now. He plans to deposit a uniform amount semiannually, beginning now and every 6 months thereafter through the end of year 20. If his investment account ha