Session 11 class.ppt

# Since aw i 15 27457889 145025000 8792111 and aw ii 15

• 28

This preview shows pages 12–19. Sign up to view the full content.

Since AW I (15%) = -\$274,578.89 + \$14.50(25,000) = \$87,921.11 and AW II (15%) = -\$456,615.67 + \$30.825(18,000) = \$98,234.33 product II should be launched

This preview has intentionally blurred sections. Sign up to view the full version.

Principles of Engineering Economic Analysis , 5th edition Break-Even Chart for Two Competing Products
Principles of Engineering Economic Analysis , 5th edition Example 13.3 A contractor is considering adding a compressor to its equipment inventory of 8 compressors. If demand exceeds the number of compressors available, additional units are rented at a charge of \$50/day. It costs \$6,000 to purchase a compressor; O&M cost per compressor is \$7.50/hr if owned and \$2.50/hr if rented. Assuming an 8-hr operating day, using a 5-yr planning horizon and a 15% MARR, determine the break-even number of days a year that at least one compressor must be rented.

This preview has intentionally blurred sections. Sign up to view the full version.

Principles of Engineering Economic Analysis , 5th edition Example 13.3 (Solution) Let X denote the number of days a year that more than 8 compressors will be required. The EUAC for each alternative (Purchase versus Rent) is EUAC P (15%) = \$6,000( A|P 15%,5) + \$7.50(8) X = \$1,789.80 + \$60 X EUAC R (15%) = \$50X + \$2.50(8) X = \$70 X Setting the equivalent uniform annual cost equal for the two alternatives yields a break-even value of X = 178.98 or 179 days/year. Hence, if the contractor anticipates that a demand for more than 8 compressors will occur 179 days or more during the year, then an additional compressor should be purchased.
Principles of Engineering Economic Analysis , 5th edition Supplementary Analysis Supplementary Analysis Sensitivity Analysis

This preview has intentionally blurred sections. Sign up to view the full version.

Principles of Engineering Economic Analysis , 5th edition In performing a sensitivity analysis we are seeking to determine the impact on the measure of economic worth when values of one or more parameters vary over specified ranges.
Principles of Engineering Economic Analysis , 5th edition Example 13.6 A \$500,000 SMP investment is being considered. It is anticipated that annual savings of \$92,5000 will result from the investment. A salvage value of \$50,000 is expected at the end of the 10-yr planning horizon. The MARR is 10%. Analyze the sensitivity of annual worth to errors in estimating (1) the initial investment, (2) the annual savings, (3) the salvage value, (4) the duration of the investment, and (5) the MARR. Specifically, consider an error range of + 50% displays the impact

This preview has intentionally blurred sections. Sign up to view the full version.

This is the end of the preview. Sign up to access the rest of the document.
• Fall '17
• Mike Heny

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern