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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This note was uploaded on 05/04/2008 for the course MIME 2600 taught by Professor Lewandowski during the Spring '08 term at Toledo.

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

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