Problem 1
South western Moving and Storage (SMS) buy a large-capacity trailer truck for $115,000 to provide short-haul earth moving services. SMS is planning selling the truck in seven years for a price of $45,000. It is estimated that operating and maintenance costs for the truck averaged $9500 per year. A complete overhaul of the truck was done at the end of year 4 which cost an extra $3200. Considering an interest rate of 7% per year:
- Determine the engineering economy symbols and their value for each option.
- Construct the cash flow diagram
- Calculate the annual equivalent cost of the truck
- What is the Present worth of the truck
Problem 2
Virgin Galactic is considering two materials for certain parts in a re-useable space vehicle: carbon fiber reinforced plastic (CFRP) and fiber reinforced ceramic (FRC). The costs are shown below. The MARR is 10 % per year
CFRP FRC
Initial cost, $ -205,000 -235,000
Maintenance cost, $/year -29000 -27000
Salvage value, $ 2000 20000
Estimated life, years 3 4
- What is the Least Common Multiple (LCM) of these two estimated life
- Draw the cash flow diagram for the LCM analysis
- Select from the two materials using the Least Common Multiple (LCM) Analysis
Hints: LCM is a method under Present Worth (PW) for resolving unequal number of years
Problem 3
An environmental engineer is considering three methods for disposing of a non-hazardous chemical sludge: land application, fluidized-bed incineration, and private disposal contract. The estimates for each method are below. The MARR is 10 % per year
First cost, $ -150,000 -900,000 0
Annual cost, $/year -29000 -27000 -170000
Salvage value, $ 2000 20000 0
Estimated life, years 4 6 2
- Determine which has the least cost on the basis of an present worth
- Determine the future worth of each alternative of the present worth calculated in ‘a’