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Determining EUAC for the given cases

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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
End-of-useful-life
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

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Problem 1:
P/G,I,n)=((1+i)^n-(i*n)-1)/(i^2*(1+i)^n)=((1+8%)^10-(8%*10)-1)/(8%^2*(1+8%)^10)=25.97683
(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.

$2.19
Similar Posting

Benefit Cost Ratio Analysis

Solutions are provided for questions given below.
See the attached file.

Using benefit-cost ratio analysis, determine which one of the three mutually exclusive alternatives should be selected. Each alternative has a 6-year useful life. Assume a 10% MARR.
A B C
First Cost $560 $340 $120
Uniform annual benefit 140 100 40
Salvage value 40 0 0

1. The benefit cost ratio for alternative A can be calculated with which equation?

B/C = [ 140 (P/A,i,6) + 40 (P/F,I,6) ]/ [ 560 ]
B/C = [ 140 (P/A,i,6) ]/ [ 560 + 40(P/F,i,6)]
B/C = [ 140 (P/A,i,6) - 40 ]/ [ 560 ]
B/C = [ 140 (P/A,i,6) ] / [ 560 - 40(P/F,i,6)]

2. The benefit cost ratio for alternative C is most nearly

1.18
1.29
1.45
1.51

3. The incremental benefit cost ratio for (B-C) is most nearly

-0.17
0.44
0.86
1.19

4. The incremental benefit cost ratio for (A-B) is most nearly

-0.15
0.18
0.88
1.57

5. Which alternative is preferred?

A
B
C

6. F is proportional to x. The equation is F = ax. The numerical value of a is most nearly

Time 0------1------2------3-----4
Cash Flow 4x 3x 2x x

11
12
13
15

If the MARR is 12%, compute the value of X that makes the two alternatives equally desirable.
A B
Cost $150 X
Uniform annual benefit 40 65
Salvage value 100 200
Useful life in years 6 6

7. The value of X is most nearly

140
260
290
300

Fence posts for a particular job cost $10.50 each to install, including the labor cost. They will last 10 years. If the posts are treated with a wood preservative, they can be expected to have a 15-year life. Assuming a 10% interest rate, how much could one afford to pay for wood preservative treatment.

8. This problem can be approached by determining EUAC. At the breakeven point, which defines the value of the maximum treatment cost, EUACtreated = EUACuntreated.

1.60
2.50
2.70
2.90

Consider three alternatives :
A B C
First Cost $50 $150 $110
Uniform annual benefit 28.8 39.6 39.6
Useful life in years* 2 6 4
Rate of return 10% 15% 16.4%
* At the end of its useful life, an identical alternative (with the same cost, benefits, and useful life) may be installed

9. Using the 12 year analysis period (which is the correct procedure), the Net Future Worths of A,B, and C, respectively are most nearly

-18.9, 75.2, 86.6
20.3, -14.4, 46.1
-22.9, 75.2, 46.1
-18.9, 75.2, 63.3

10. Based on Future Worth Analysis, the recommended alternative is

A
B
C

11. The Payback Period (years) for A is most nearly

0.56
0.72
1.13
1.74

12. The Payback Period (years) for B is most nearly

2.4
2.6
3.1
3.8

13. Based on Payback Period, the preferred alternative is

A
B
C.

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