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Caterpillar Inc. would like to upgrade current fabrication techniques on its Excavator assembly line. Upgrades include state of the art equipment designed to automate specific portions of fabrication which have been very labor intensive in the past. To meet current floor plan space, four equipment design alternatives have been considered, which will have capital investment and annual operating expenses as shown in the table below. Assuming a useful life of 8 years for each design, no market value, and a desired MARR of 12% per year, determine which design should be selected based on the IRR method (incremental rate of return analysis). Capital investment Annual expenses: Power Labor Maintenance Taxes and insurance Design 1 525,000 168,000 20,000 345,000 12,000 Design 2 850,000 180,000 25,000 200,000 15,000 Design 3 1,135,000 220,000 65,000 320,000 25,000 Design 4 1,420,000 235,000 50,000 370,000 30,000

Caterpillar Inc. would like to upgrade current fabrication techniques on its Excavator assembly line. Upgrades include state of the art equipment designed to automate specific portions of fabrication which have been very labor intensive in the past. To meet current floor plan space, four equipment design alternatives have been considered, which will have capital investment and annual operating expenses as shown in the table below. Assuming a useful life of 8 years for each design, no market value, and a desired MARR of 12% per year, determine which design should be selected based on the IRR method (incremental rate of return analysis). Capital investment Annual expenses: Power Labor Maintenance Taxes and insurance Design 1 525,000 168,000 20,000 345,000 12,000 Design 2 850,000 180,000 25,000 200,000 15,000 Design 3 1,135,000 220,000 65,000 320,000 25,000 Design 4 1,420,000 235,000 50,000 370,000 30,000

Fundamentals Of Construction Estimating
Fundamentals Of Construction Estimating
4th Edition
ISBN:9781337399395
Author:Pratt, David J.
Publisher:Pratt, David J.
Chapter12: Pricing Masonry, Carpentry, And Finishes Work
Section: Chapter Questions
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Caterpillar Inc. would like to upgrade current fabrication techniques on its Excavator assembly line. Upgrades include state of the art equipment designed to automate specific portions of fabrication which have been very labor intensive in the past. To meet current floor plan space, four equipment design alternatives have been considered, which will have capital investment and annual operating expenses as shown in the table below. Assuming a useful life of 8 years for each design, no market value, and a desired MARR of 12% per year, determine which design should be selected based on the IRR method (incremental rate of return analysis). Capital investment Annual expenses: Power Labor Maintenance Taxes and insurance Design 1 Design 2 525,000 850,000 168,000 20,000 345,000 12,000 180,000 25,000 200,000 15,000 Design 3 1,135,000 220,000 65,000 320,000 25,000 Design 4 1,420,000 235,000 50,000 370,000 30,000
Transcribed Image Text:Caterpillar Inc. would like to upgrade current fabrication techniques on its Excavator assembly line. Upgrades include state of the art equipment designed to automate specific portions of fabrication which have been very labor intensive in the past. To meet current floor plan space, four equipment design alternatives have been considered, which will have capital investment and annual operating expenses as shown in the table below. Assuming a useful life of 8 years for each design, no market value, and a desired MARR of 12% per year, determine which design should be selected based on the IRR method (incremental rate of return analysis). Capital investment Annual expenses: Power Labor Maintenance Taxes and insurance Design 1 Design 2 525,000 850,000 168,000 20,000 345,000 12,000 180,000 25,000 200,000 15,000 Design 3 1,135,000 220,000 65,000 320,000 25,000 Design 4 1,420,000 235,000 50,000 370,000 30,000
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