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Determining EUAC for the given cases

1. An oil refinery must now be sending its waste liquids through a costly treatment process before discharging them into a nearby stream. The engineering department estimates costs at $30,000 for the first year. It is estimated that if process and plant alterations are made, the waste treatment cost will decline $3,000 each year. As an alternate, a specialized firm, Hydro-Clean, has offered a contract to process the waste liquids for 10 years for a fixed price of $15,000 per year, payable at the end of each year. Either way, there should be no need for waste treatment after 10 years. The refinery manager considers 8% to be a suitable interest rate. The EUAC of the refinery treating its own waste is?

2. A suburban taxi company is considering buying taxis with diesel engines instead of gasoline engines. The cars average 50,000 km/yr.
Diesel Gasoline
Vehicle cost $13,000 $12,000
Useful life (yrs) 3 4
Fuel cost per liter 48 cents 51 cents
mileage (km/liter) 35 28
Annual repairs $300 $200
Annual insurance
premium 500 500
resale value 2,000 3,000
Interest is 6%
The equivalent uniform annual cost EUAC of the taxi with the diesel engine is?

3. For problem 2, the Equivalent Uniform Annual Cost (EUAC) of the car with the gasoline engine is?en


Solution Preview

Problem 1:
(P/A,I,n)= 1/8%*(1-1/(1+8%)^10)=6.710081

Present Value of Costs=6.710081*30000-3000*25.97683=123371.9
EUAC of refinery treating its own ...

Solution Summary

Solution describes the steps to calculate EUAC in each of the given cases.