Lec%2037_Full-1

Lec%2037_Full-1 - IE 343 Engineering Economics Lecture 37:...

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IE 343 Engineering Economics Lecture 37: Chapter 9 – Replacement Analysis Instructor: Tian Ni Nov.30, 2011 IE 343 Fall 2011 1
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IE 343 Fall 2011 15 th Week Nov 28 Nov 30 Dec 2 (Quiz 8) (HW10 due &HW11 out) 16 th Week Dec 5 Dec 7 Dec 9 (Review (Quiz 9 & (HW11 due & Chapter 1-9) Final Review Q&A) Sample Problems) 17 th Week Dec 12 (Final Exam Mon 10:20am – 12:20pm EE 129) 2
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IE 343 Fall 2011 Example 9.6 A new forklift truck (Challenger) will require an investment of $30,000 and is expected to have year-end MVs and annual expenses as shown. If the before-tax MARR is 10% per year, how long should the asset be retained in service? CHALLENGER Year j MVj Annual Expenses 0 30000 1 22500 3000 2 16875 4500 3 12750 7000 4 9750 10000 5 7125 13000 3
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IE 343 Fall 2011 Example 9.6 It is desired to determine now how much longer a forklift truck (Defender) should remain in service before it is replaced by the new truck (Challenger) The defender in this case is two years old, originally cost $19,500, and has a present realizable MV of $7,500. If kept, its MVs and annual expenses are expected to be as follows: DEFENDER Year j MVj Annual Expenses 0 7500 1 6000 8250 2 4500 9900 3 3000 11700 4 1500 13200 4
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IE 343 Fall 2011 Example 9.6 – Challenger Economic Life of the Challenger is 3 years Minimum EUAC = 12918 Year j MVj Ej MV Loss(j) Cost of Capital i=10% Total Marginal Cost(TCj) TCj(P/F,i,j) Σ TCj(P/F,i,j) EUACj 0 30000 1 22500 3000 7500 3000 13500 12273 12273 13500 2 16875 4500 5625 2250 12375 10227 22500 12964 3 12750 7000 4125 1687.5 12813 9626 32126 12918 4 9750 10000 3000 1275 14275 9750 41876 13211 5 7125 13000 2625 975 16600 10307 52184 13766 5
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IE 343 Fall 2011 Example 9.6 – Defender Economic Life of the Defender is 1 years Minimum EUAC = 10500 Year j MVj Ej MV Loss(j) Cost of Capital i=10% Total Marginal Cost(TCj) TCj(P/F,i,j) Σ TCj(P/F,i,j) EUACj 0 7500 1 6000 8250 1500 750 10500 9545 9545 10500 2 4500 9900 1500 600 12000 9917 19463 11214 3 3000 11700 1500 450 13650 10255 29718 11950 4 1500 13200 1500 300 15000 10245 39963 12607 6
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10500 11214 11950 12607 13500 12964 12918 13211 13766 0 2000 4000 6000 8000 10000 12000 14000 16000 1 2 3 4 5 Plot of EUACj for Defender and Challenger EUACj (Defender) EUACj (Challenger) IE 343 Fall 2011 Example 9.6 – Solution Since Minimum EUAC(Challenger)> Minimum EUAC(Defender), we retain the Defender for one more year! 7
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IE 343 Fall 2011 Example 9.6 – Solution Is it over to retain the Defender for just one more year? How about one year later? 8
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IE 343 Fall 2011 Example 9.6 – Solution The marginal cost of keeping the truck(Defender) for the second year is $12,000, which is still less than the minimum EUAC for the challenger ($12,918). However, the marginal cost for keeping the
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This note was uploaded on 01/28/2012 for the course IE 343 taught by Professor Vincent,g during the Winter '08 term at Purdue.

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Lec%2037_Full-1 - IE 343 Engineering Economics Lecture 37:...

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