Solve the following problems from the back of our fifth chapter:5-35-135-225-395-59And this additional problem…An anonymous University instructor who teaches a class to engineering students in a small class has decided that raising and lowering the projector screen at the front of the class is a terrible burden. This instructor has asked the universty to purchase an industrial robot to make this task easier. There are two machines under consideration, and your task is to determine the present worth of each of them, and make a recommendation about which is the best option. Assume that universty evaluates investments like this at a rate of 8.7%.The first machine is a FANUC R-1000iA/80F. This robot will have an initial cost of $75,075.75 Given the ‘intense’ demands placed upon this robot, we expect it to outlast this instructor, but, we’ll consider this investment over a 35 year time horizon. Since this is a new robot, maintenance costs should be relatively infrequent, we anticipate spending approximately 10% of the purchase price every ten years.The second option under consideration is a used robot currently listed for sale on ebay.This is an ABB IRB 1400 M2000 (additional information is available here). It is substantially cheaper; it’s listed for $4,000.00, but, we think we can purchase it for $3,888.88. It was originally built in 2003 and has logged a lot of hours, so there’s expected to be substantially more maintenance. During the first year, we anticipate $1,234.56 in maintenance and operating expenses. Each year thereafter, the maintenance and operating expenses are expected to increase by 13.3% per year.What is the PV for each of these alternatives?Which of them would you recommend?Why did you make that recommendation?5.59
alternative is to build a half-capacity tunnel now
(cost $402,000), which should be adequate for
20 years, and then to build a second parallel half-
capacity tunnel. The maintenance cost of the tunnel
linings every 10 years for the full-capacity tunnel
is $40,000 and for each half-capacity tunnel it is
The friction losses in the half-capacity tun-
nels will be greater than in the full-capacity tunnel.
The estimated additional pumping costs in each
half-capacity tunnel will be $2000 per year. Based
on capitalized cost and a 7% interest rate, which
alternative should be selected?
5-59 A city has developed a plan to provide for future
municipal water needs. The plan proposes an
aqueduct that passes through 500 feet of tunnel in
a nearby mountain. The first alternative is to build a
full-capacity tunnel now for $556,000. The second
5-22 Argentina is considering constructing a bridge across
the Rio de la Plata to connect its northern coast to
the southern coast of Uruguay. If this bridge is con-
structed, it will reduce the travel time from Buenos
Aires, Argentina, to São Paulo, Brazil, by over
10 hours, and there is the potential to significantly
improve the flow of manufactured goods between the
two countries. The cost of the new bridge, which will
be the longest bridge in the world, spanning over 50
miles, will be $700 million. The bridge will require
an annual maintenance of $10 million for repairs
and upgrades and is estimated to last 80 years. It is
estimated that 550,000 vehicles will use the bridge
during the first year of operation and an additional
50,000 vehicles per year until the tenth year. The
annual traffic for the remainder of the life of the
bridge will be 1,000,000 vehicles per year. These
data are based on a toll charge of $90 per vehicle.
The Argentine government requires a minimum rate
of return of 9% to proceed with the project.
(a) Does this project provide sufficient revenues to
offset its costs?
(b) What considerations are there besides economic
factors in deciding whether to construct the
5-39 Which equipment is preferred if the firm’s inter-
est rate is 15%? In PW terms how great is the
First cost
Annual O&M
Salvage value
Overhaul (Year 6)
Not required
Life, in years
5-13 By installing some elaborate inspection equipment
on its assembly line, the Robot Corp. can avoid hir-
ing an extra worker who would have earned $36,000
a year in wages and an additional $9500 a year in
employee benefits. The inspection equipment has a
6-year useful life and no salvage value. Use a nomi-
nal 18% interest rate in your calculations. How much
can Robot afford to pay for the equipment if the
wages and worker benefits were to have been paid
(a) At the end of each year
(b) Monthly
Explain why the answer in (b) is larger.

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