IE343_HW5_Solutions

IE343_HW5_Solutions - Homework Assignment #5 Solutions...

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Homework Assignment #5 Solutions IE 343 – Homework Assignment #5 Solutions – Page 1 PURDUE UNIVERSITY Homework Assignment #5 IE 343: Engineering Economics Assigned: 24 Sept 2010 Fall 2010 Due: 01 Oct 2010 Instructor: A. Capponi Missing name on the top of each page submitted – 2 Not stapled together – 2 Not completed on the correct template – 10 Problem 1 (15 points) Consider a machine that cost $15,000 and has a 5 year useful life. At the end of 5 years, it can be sold for $3,500. The machine increases the profit for the firm by $4,000 per year. (a) Draw cash flow diagram 3,500 $4,000 $4,000 $4,000 $4,000 $4,000 0 1 2 3 4 5 $15,000 (b) Should the machine be purchased if the MARR is 10% per year and the annual worth method is used? We have CR(0.1) = $15,000 (A/P, 0.1,5) - $3,500 (A/F, 0.1, 5) = $3,957-$573.3 = $3,384. Thus, we get that the annual worth is AW(0.1) = $4,000 - $3,384 = $616 > 0. Since AW(0.1) >0, we can conclude that buying the machine is a worthwhile investment.
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Homework Assignment #5 Solutions IE 343 – Homework Assignment #5 Solutions – Page 2 Problem 2 ( 15 points ) The heat loss through the exterior walls of a processing plant is estimated to cost the owner
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This note was uploaded on 09/19/2011 for the course IE 343 taught by Professor Vincent,g during the Spring '08 term at Purdue.

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IE343_HW5_Solutions - Homework Assignment #5 Solutions...

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