ECON 426 Chapter : Buchmueller Summary "Fringe Benefits and the Demand for Part Time Workers"

1. 1. What is the capitalized value of an infinite series of $1,000 biennial (every two years) payments? MARR = 10%

   		$4,950
   		$4,025
   	.	$4,350
   		$4,762

   
   

   1. 2. Frank West Enterpises would like to choose one of the following plans for expansion. Using present worth analysis, find the best alternative among the three alternatives and the Do-Nothing.

      	Alt. A	Alt. B	Alt. C
      Initial Cost	$10,000	$21,000	$8,000
      EUAB	$6,000	$7,000	$4,000
      EUAC	$1,500	$1,000	$2,000
      Salvage Value	$2,000	$8,000	$3,000
      Life	2 Years	3 Years	2 Years

      Use a MARR of 10%.
      

      	.	Do-Nothing
      	.	Alt. C
      	.	Alt. B
      	.	Alt. A

      
      3.

      1. U. S. Engineering is investigating the possibility of acquiring new automated packaging equipment at a cost of $12,000. It is expected that the equipment will have a salvage value of $1,000 at the end of its useful life of 10 years. It is determined by the plant engineering department at the company that the operation and maintenance cost will be $500 in the first year and will gradually increase every year starting year 2 at the rate of $50 until the equipment is retired. Determine the equivalent uniform annual cost (EUAC) if MARR for the company is 10%.

         		$2,575.95
         		$2,150.50
         	.	$2,176.60
         	.	$2,184.40

         
         4.

         1. The cash flows given in table below are for two different alternatives. MARR =10%

            Data	C	D
            Initial Cost	$20,000	$80,000
            Uniform Annual Benefits	$6,000	$10,000
            Salvage Value	$5,000	$20,000
            Useful Life in years	5	infinity

            The equivalent uniform annual worth (EUAW) of alternative N is ______________.

            Hint: Assume the Salvage Value is never realized since N is infinite.

            		$2,000
            		$1,920
            		$1,762
            		$2,476

            
            5.
            

            1. Compare the following plans using a MARR of 6%.

               Data	Plan X	Plan Y
               Equipment First Cost	$50,000	$75,000
               Annual Operation & Maintenance Cost	$3,000	$2,500
               Salvage Value	$10,000	$0
               Service Life, Years)	25	50

               		$6,728; $7,255
               		$7,255; $9,000
               	.	$6,728; $7,728
               	.	$6,728; $8,200

               
               6.
               

               1. LAEP, Inc. wants to evaluate two methods of shipping their products. The following cash flows are associated with each alternative:

                  Data	Method
                  	A	B
                  Life (Years)	10	10
                  First Cost	$700,000	$1,512,000
                  M&O Cost	$18,000	$9,000
                  M&O Cost Gradient	$900	$775
                  Annual Benefit	$154,000	$303,000
                  Salvage Value	$142,000	$210,000

                  Annual profits are based on amount of products which can ordinarily be shipped each year as a function of the amount of vehicles or service purchased with the first cost and the M&O costs.

                  Using a MARR of 15%, calculate the equivalent uniform annual cash flow (EUAB - EUAC) for each alternative.

                  Determine the most desirable alternative based on the results.

                  		$389.57, $445.90; Method A
                  		$445.90, $389.57; Method A
                  	.	$445.90, $389.57; Method B
                  	.	$389.57, $445.90; Method B

               7.

               1. For the cash flow diagram shown, which of the following equations properly calculates the uniform equivalent (A)?

                  n	0	3	6	9	12	15
                  Dollars	$100	$100	$100	$100	$100	$100

                  		A=100(A/P,i,15)+ 100(A/F,i,3)
                  		A=100(A/P,i,15)
                  		A=100(A/F,i,3) + 100(A/F,i,15)
                  		A=100(A/P,i,3) + 100(A/F,i,3)

                  8.
                  

                  1. Three different alternatives shown in table below are being considered by U. S. Engineering systems.

                     Assume that alternatives X and Z are replaced at the end of their lives.

                     Data	Alternative X	Alternative Y	Alternative Z
                     Initial Cost	$6,000	$1,000	$1,500
                     Uniform Annual Benefits	$810	$125	$ 230
                     Useful Life in Years	20	infinite	10
                     MARR	12%

                     The NPW for alternative

The table below represents the hourly output and cost structure for a local pizza shop. The market is perfectly competitive, and the market price of a pizza in this area is $10. Total cost includes all implicit opportunity costs. Calculate the pizza shop's marginal cost and marginal revenue at each rate of output and fill in the values in the table.

How I calculate this?

A publisher faces the following demand schedule for the next novel from one of its popular authors: