Homework Handout 2 - 1CEE 201 Homework Handout 2, Spring...

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1 CEE 201 Homework Handout 2, Spring 2008. Due Jan. 29, 2008 Note: This assignment is easier using spreadsheet software 1. An engineering construction firm is considering the purchase of a new crane. Two models are being considered, both of which are considered to perform adequately. Hence the decision boils down to which one has the lowest overall cost. The firm uses a discount rate of 8% per year for decisions of this type. The table below summarizes cost data for the two models. Monetary amounts are in thousands of US dollars. Model Initial Cost Life, years Salvage value Manitowoc 550 40/yr 25 50 450 55/yr 15 20 a. Draw a cash flow diagram for each of the two cranes. b. Determine the best crane based on EUAC. Show your work thoroughly. Justify your choice. Calculate the cost ratio of the two cranes. c. Using present value analysis, calculate the present value of the cost of each crane for its life. Calculate the cost ratio of the two cranes. Compare what these results indicate about the “best” crane relative to the results in Part b. State what,
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Homework Handout 2 - 1CEE 201 Homework Handout 2, Spring...

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