![Engineering Economy](https://www.bartleby.com/isbn_cover_images/9780073523439/9780073523439_largeCoverImage.gif)
(a)
Calculate the equivalent annual worth.
(a)
![Check Mark](/static/check-mark.png)
Explanation of Solution
Table-1 shows the cash flow of different projects.
Table -1
Projects | RK | SK |
First cost (C) | -250,000 | -170,000 |
AOC (MO) per year | -31,000 | -35,000 |
Overhaul cost (O) in year (n1) 2 | -26,000 | |
Salvage value (SV) | 40,000 | 10,000 |
Time period (n) | 6 | 4 |
Interest (i) | 10% | 10% |
The equivalent annual worth of Model RK (AWG) can be calculated as follows:
The annual worth of Model RK is -$83,217.47.
The equivalent annual worth of Model SK (AWF) can be calculated as follows:
The annual worth of Model SK is -$93,254.08. Since the annual worth of Model RK is greater than Model SK, select Model RK.
(b)
Calculate the annual worth using spreadsheet function.
(b)
![Check Mark](/static/check-mark.png)
Explanation of Solution
Spreadsheet function to calculate the annual worth of Model RK is given below:
=-PMT(10%,6,-250000,40000)-31000
The above function gives the value of $83,217.55.
Spreadsheet function to calculate the annual worth of Model SK is given below:
=-PMT(10%,4,-170000,10000)-35000-PMT(10%,4,-PV(10%,2,,-26000))
The above function gives the value of $93,254.04.
Want to see more full solutions like this?
Chapter 6 Solutions
Engineering Economy
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
![Text book image](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)