Engineering Economics — Quiz 7

Questions in this quiz (4)

1. A sustainable infrastructure project has an initial cost of $$6500000$$ and annual maintenance costs of $$120000$$. The project provides annual benefits of $$480000$$ and additional environmental benefits of $$150000$$ over a $$30$$ year life. Using a discount rate of $$5\%$$, the benefit cost ratio is most nearly:

   • $$1.18$$
   • $$1.32$$ $$1.47$$ $$1.61$$
   • $$1.47$$
   • $$1.61$$

2. A company is evaluating whether to replace existing equipment with new equipment. The defender has a current market value of $$30000$$, annual O&M costs of $$14000$$, remaining life of $$4$$ years, and salvage value of $$3000$$. The challenger costs $$70000$$, has annual O&M costs of $$5500$$, life of $$7$$ years, and salvage value of $$12000$$. Using MARR of $$9\%$$, the EUAC of the challenger is most nearly:

   • $$15120$$
   • $$16480$$
   • $$17950$$ $$19200$$
   • $$19200$$

3. Equipment costs $$55000$$ and has the following projected annual O\&M costs and salvage values. Using a MARR of $$11\%$$, the economic service life is: $$\begin{array}{|c|c|c|} \hline Year&O\&M\ Cost&Salvage\ Value\\ \hline 1&4000&42000\\ 2&6000&35000\\ 3&8500&28000\\ 4&11500&20000\\ 5&15000&14000\\ \hline \end{array}$$

   • $$2\ years$$
   • $$3\ years$$
   • $$4\ years$$ $$5\ years$$
   • $$5\ years$$

4. A project generates annual revenue of $$180000$$ with operating costs of $$95000$$. Depreciation expense is $$30000$$ per year and the marginal tax rate is $$30\%$$. The after tax cash flow is most nearly: Solution: First compute taxable income: $$180000-95000-30000=55000$$ Compute taxes: $$0.30(55000)=16500$$ Compute net income: $$55000-16500=38500$$ Add back depreciation to get after tax cash flow: $$38500+30000=68500$$ The exact value is: $$68500$$ Most nearly: $$69500$$ Final answer: $$69500$$

   • $$55500$$
   • $$62000$$
   • $$68500$$
   • $$76000$$