2121_hw9 (Chapters 9 and 10)

# 2121_hw9 (Chapters 9 and 10) - Annual operating and...

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IE 1040 Engineering Economic Analysis Fall Term, 2011 (2121) Homework #9 – Chapters 9 and 10 T/TH Section Monday Section Assigned: 11/1/11 11/7/11 Due: 11/8/11 11/14/11 Total Points: 70 points All problems are worth 10 points. Chapter 9: 9-57 9-61 – Note that the 3.2 M maintenance cost is a geometric gradient and recall that we covered how to find the present equivalent of a geometric gradient in Chapter 4. Chapter 10: 10-5 10-17 10-29 10-36 Additional Problem: A nationwide motel chain is considering locating a new motel in Bigtown, USA. The cost of building a 150 room motel is \$5,000,000 and the life is expected to be 15 years. The furnishings for the motel must be replaced every five years at an estimated cost of \$1,875,000 (so at year 0, 5, and 10). The old furnishings have no salvage value.
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Unformatted text preview: Annual operating and maintenance costs are estimated to be \$125,000. The salvage value of the motel is estimated to be 20% of the cost of building. Rooms at the motel are projected to be rented at an average rate of \$45 per night. The motel will typically rent 60% of the rooms per night. Assume the motel is open 365 days per year. The motel chain’s MARR is 10%. 1. Graphically investigate the sensitivity of the EUAW of this project to changes in the estimates for the capital investment, MARR, and occupancy rate. Use percent change on the x-axis and EUAW on the y axis. Use Excel. 2. Determine (either graphically or mathematically) the percent change that can be tolerated for each factor before the project is no longer economically attractive. To which of these factors is the decision most sensitive?...
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