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Exam 3 Solutions

Exam 3 Solutions - MIME 2600 Engineering Economics Name...

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MIME 2600 – Engineering Economics Name: ______________________________ Midterm Exam 3 (100 Points) November 15, 2006 All problems assume compounding interest. Show all work to receive full or partial credit. Problem #1 (35 points) Your company is interested in purchasing a new rolling press to use in the factory. Two different models are available to satisfy your current production requirements. Model A: This model costs \$200,000 and requires annual maintenance expenses of \$5,000. The machine has a service life of 7 years and a salvage value of \$30,000 at the end of its life. Model B: This model costs \$150,000 and requires annual maintenance expenses of \$10,000. The machine has a service life of 7 years and a salvage value of \$25,000 at the end of its life. (a) Determine the annual equivalence cost of each model assuming MARR = 10%. Model A: AE = (\$200,000-\$30,000)(A/P,10%,7) + 0.10(\$30,000) + \$5,000 = \$42,918 Model B: AE = (\$150,000-\$25,000)(A/P,10%,7) + 0.10(\$25,000) + \$10,000 = \$38,175 (b) Determine the unit cost per sheet assuming the press runs 10,000 sheets per year. Model A:

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Exam 3 Solutions - MIME 2600 Engineering Economics Name...

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