quiz6 - is 10 years and salvage values for both designs are...

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Spring ’09 IE341 Quiz 6 (45 min) Q.1. (60 points) The present worth of the after-tax cash flows through year k, PWk, for a defender (three- year remaining useful life) and a challenger (five-year useful life) are given in the following table: Assume the after-tax MARR is 12% per year. Based on this information, a) What is the economic life and the related minimum equivalent uniform annual cost, (EUAC), when k = N* AT, for both the defender and the challenger. b) When should the challenger (based on the present analysis) replace the defender? Why?
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Q.2 . (40 points) A production firm is considering two designs for its material handling system. Design I has initial equipment cost of $250,000 and annual operating and maintenance costs of $30,000. Design II costs $350,000 initially, and has operating and maintenance costs of $15,000/ year. The planning horizon
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Unformatted text preview: is 10 years and salvage values for both designs are estimated to be zero. Assume that the firm may be mistaken in all cost estimates and perform a sensitivity analysis to determine the effect of simultaneous errors in estimating the differences in initial investment, and the differences in annual operating and maintenance costs, on the decision of the firm. Use an annual worth analysis. Also, carry out a graphical analysis that shows the indifference curve on the errors plane and identify the cost to which the investment decision is most sensitive. MARR = 15%. AW analysis should be carried out on the differences of initial investment and annual operating maintenance cost....
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This note was uploaded on 07/30/2009 for the course INDUSTRIAL 304 taught by Professor Temeldursun during the Spring '09 term at Boğaziçi University.

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quiz6 - is 10 years and salvage values for both designs are...

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