# First cost 50000 500000 annual cost year 30000 1000

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First cost, \$ 50,000 500,000 Annual cost, \$/year 30,000 1,000 Salvage value, \$ 10,000 500,000 Life, years 10 200 CHAPTER 5 Present Worth Analysis
5.25 Compare the alternatives shown below on the basis of their capitalized costs using an interest rate 12% per year, compounded semiannually.
E F G First cost, \$ 50,000 300,000 900,000 Semiannual cost, 30,000 10,000 3,000 \$/6 months Salvage value, \$ 5,000 70,000 200,000 Life, years 2 4
5.26 A stockbroker claims she can consistently earn 15% per year on an investor’s money. If she invests \$10,000 now, \$30,000 three years from now, and \$8000 per year for 5 years starting 4 years from now, how much money can the client withdraw every year forever, beginning 12 years from now? Disregard taxes.
5.27 An alternative for producing a pesticide will have a first cost of \$200,000 with annual costs of \$50,000. Income is ex- pected to be \$90,000 per year. What is the
payback period at ( a ) i 0% and ( b ) 15% per year? 5.28 Two machines can be used for producing a certain part from titanium. The costs and other cash flows associated with each al- ternative are shown below. Determine which alternative(s) should be retained for further analysis if alternatives must have a payback of 5 years or less. Perform the analysis with ( a ) i 0% and ( b ) i 10% per year. 5.30 The ANCO insurance agency has a docu- ment imaging system that needs replace- ment. A local salesperson quoted a cost of \$10,000 with an estimated salvage of \$900 after 5 or more years. If the system is ex- pected to save \$1700 per year in clerical time, find the payback time at 8% per year. The office manager has a practice to pur- chase equipment only when the payback is less than 6 years. Otherwise, he prefers to lease. Should the imaging system be pur- chased or leased? i
First cost, \$ 40,000 90,000 Net annual income, \$/year 10,000 15,000 Maximum life, years 10 10 Salvage value at end of life, \$ 20,000 30,000 5.29 Awindow frame manufacturer is searching for ways to improve revenue from its triple-insulated sliding windows, sold pri- marily in the far northern states of the United States. Alternative A is an increase in TV and radio marketing. A total of \$600,000 spent now is expected to increase revenue by \$100,000 per year. Alterna- tive B requires the same amount for en- hancements to the in-plant manufacturing process that will improve the temperature retention properties of the seals around each glass pane. New revenues start slowly for this alternative at an estimated \$15,000 per year, with a growth of 20% per year as the improved product gains reputation among builders. The MARR is 6%, and maximum projection periods are 8 years for A and 16 years for B. Use both payback analysis and present worth analysis at 6% to select the more economical alternative. State the reason(s) for any difference in the alternative chosen between the two analyses.