Chapter 9 - McGill Faculty of Engineering MIME 310...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
1 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials Chapter 9. Sensitivity and Risk Analyses
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials 9.1 The installation of automated equipment in the production of blasting devices is expected to lower the probability of producing defective units. The annual production rate is 100 000 units and the cost associated with replacing defective devices is $10 per unit. A decision concerning the level of autom- ation is required. Operating expenses are identical for all levels of autom- ation. Installation costs (time 0) and associated probabilities are as follows: Assuming a cost of capital of 20% and a life of 10 years, what level of automation minimises the expected equivalent annual cost associated with the project? Level of automation Probability of producing defective devices Initial Cost ($) 1 0.100 100 000 2 0.050 150 000 3 0.020 200 000 4 0.010 275 000 5 0.005 325 000 6 0.002 350 000 7 0.001 400 000
Background image of page 2
3 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials \ Level 3 minimizes the expected equivalent annual costs. Operating expenses are ignored because they are common to all levels of automation.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 9

Chapter 9 - McGill Faculty of Engineering MIME 310...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online