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PracticeFinal - Practice Final Exam IE 1040 Spring, 2008...

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Practice Final Exam IE 1040 Spring, 2008 (2084) Practice techniques 1.) Find the PW, AW, and FW of the following investment (Before Tax): Initial investment = -$100,000 Annual savings = $35,000 Life = 5 years Salvage value = $20,000 Before-Tax MARR = 15% Answer: PW = $27,271 AW = $8,136 FW = $54,844 Chapter 6 (Comparing Alternatives) 2.) Two alternative boilers are being considered for a particular plant. The following costs are relevant: Boiler A Boiler B Initial Cost $50,000 $120,000 Useful Life 20 years 40 years Salvage Value $10,000 $20,000 (at the end of Useful Life) $9,000 $6,000 a.) If the plant’s MARR is 10%, and the repeatability assumption is valid, which boiler would you recommend? Answer: AW A = -$14,700; AW B = -$18,320; Select Boiler A to minimize costs. b.) If the repeatability assumption were not valid, what would be another way to compare these two alternatives (calculations are not necessary)? Answer: If you use the coterminated assumption and a 20-year life, find the imputed market value of Boiler B at the end of the 20 years and compare the PWs based on 20 years. You could also determine the costs of a second Boiler A for years 21 to 40 and compare on a 40-year life. Chapter 11 (B/C Ratios)
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This note was uploaded on 06/22/2008 for the course IE 1040 taught by Professor Karenbursic during the Spring '08 term at Pittsburgh.

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PracticeFinal - Practice Final Exam IE 1040 Spring, 2008...

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